Commercial lending

Bank lending activity grew at a strong clip in the second quarter and continues to expand. Yet rising interest rates and recession concerns could hamper future growth.

The agency acknowledged that loan performance in the sector has been strong, but cited several reasons to think that might change, including rising interest rates, the effects of inflation and uncertainty about the future of work and commerce.

Most banks’ interest income will rise following the Fed policy shift. But the rate increase also boosts the likelihood of a recession that could hurt borrowers and drive up loan losses.

The American Bankers Association’s credit conditions index fell sharply, as economists foresaw dampening loan demand. The weaker outlook lines up with major bank CEOs’ increased worries over a possible recession.

As inflation increases, more companies are shifting to remote and hybrid work to get their costs under control. Landlords could face rising vacancies and tumbling revenue, leaving them behind on loan payments.

The move away from the scandal-plagued London interbank offered rate is going smoothly, according to a new survey of lenders and corporate borrowers. But many customers still face operational challenges ahead of a mid-2023 deadline for switching older loans.

Banks and companies that use artificial intelligence to make loans agree with regulators that it should be tested for fairness. But they also say traditional loans could be just as biased.

Multifamily and specialty finance loans, which were highlights during the fourth quarter, should increase further in 2022, company executives said.

The Secured Overnight Financing Rate has benefited — amid the phaseout of Libor — from positive comments by regulators. Is a multirate environment, which some banks would prefer, still possible?

Key retail vacancies, a drop in office occupancies, plus a combination of lower oil prices, a housing market oversupply — worsened by the coronavirus pandemic — caused loan-level performance issues.