Why B of A's Moynihan is confident about bank lending

Bank of America CEO Brian Moynihan tried to reassure markets Tuesday that bank lending is less challenged than it looks.

Only a few days into the first quarter’s earnings reports, some of the nation’s large and regional banks have already posted disappointing figures for loan growth. Comerica in Dallas and Regions Financial in Birmingham, Ala., on Tuesday reported lending declines, largely due to commercial weakness.

B of A was able to report yearly loan growth, albeit at a middling 1-2% yearly pace depending on how one slices the numbers. Across the entire company, consumer loans rose roughly 1% and commercial loans rose 4%. Its U.S. consumer banking operation carried a heavy load, growing 7.4% to $258.4 billion.

“We've been able to grow in the mid-single digits … against the backdrop of an economy growing 1.5% to 2%. If that grows faster, we'll grow faster,” Moynihan said. “If that stays in that range, we should be able to continue to grow at that level. We’ve been able to outgrow the economy, but we’re going to be dependent on the economy to keep growing.”

Andrew Harrer/Bloomberg

At least one analyst agreed with that assessment, saying that he expects commercial real estate and commercial-and-industrial lending will turn eventually.

“Loan growth really hasn’t materialized yet,” said Justin Fuller, senior director at Fitch Ratings. “I think loan growth is just going to take a little longer to play out.”

Indeed, even B of A had some strong areas in commercial lending, especially in the United States. Average balances of commercial real estate loans rose 1% to $57.8 billion from a year earlier. And total U.S. commercial loans, which includes small-business lending, rose 5% to $288 billion.

“There’s been a lot of discussion regarding a slowdown,” Moynihan said. “In our core middle-market business, representing a broad base of American companies, our business loans grew 7%. And small business had the best production quarter in its history.”

That wasn’t the case at Regions and Comerica, both of which also reported first-quarter earnings on Tuesday. Average loans and leases at at Regions fell 2% to $80.2 billion on sharp declines in direct energy and multifamily lending. Total loans declined 1% at Comerica, to $48 billion, largely because of a drop in commercial loans.