Credit crunch subsides as banks compete for loans
Credit conditions are loosening and banks are increasingly competing for commercial borrowers, Connecticut lenders say.
“If there was a credit crunch, it’s long gone now,” said Reyno Giallongo, CEO of First County Bank, headquartered in Stamford. “Banks are anxiously looking to loan money these days.”
Giallongo said banks are flush with deposits and earning very little on investments, making the best assets commercial loans, commercial real estate loans or residential mortgages. As a result, Giallongo said he’s seeing more big banks that previously had been holding back compete for loans with community banks like First County Bank.
“Fairfield County, especially, is an overbanked market,” he said. “The competition for commercial loans is very heated.”
Concern over the availability of credit dropped off the list of top concerns of business leaders in this year’s southwestern New England CEO survey, produced by First Niagara Bank. According to the survey of roughly 360 CEOs, key concerns are health care costs, adverse economic conditions and governmental regulation and taxation. Surprising, securing credit didn’t make the list, said David Ring, northeast president of First Niagara.
“The availability of credit doesn’t seem to be on the radar,” Ring said. “Banks have healthy balance sheets and are ready to lend again. From a banker’s perspective, things have bottomed out.”
Like Giallongo, Ring said he’s seeing more banks come back into the marketplace. However, Ring emphasized that First Niagara never stopped lending during the recession and has grown dramatically. First Niagara has had double digit loan growth every quarter for the last 11 quarters, he said.
Nationally, lending standards on commercial and industry loans have eased over the past three months as banks also loosen terms on such loans, according to the January Senior Loan Officer Opinion Survey on Bank Lending Practices conducted by the Federal Reserve.
Demand for business loans, prime residential mortgages and auto loans has strengthened over the past three months, according to the Fed report.
Michael LaBella, Connecticut market president of TD Bank, also said his bank never stopped lending and that competition for small business and commercial loans has returned.
“For the borrower, it’s driving down prices and the terms are getting a little easier,” LaBella said. “That’s good news and bad news.”
It’s good news for businesses looking for credit to expand but bad news for banks that may be tempted to loan to bad candidates to compete, which attributed to the financial collapse, he said.
“We remain consistent on our credit culture, which kept us out of problems in the first place,” LaBella said. “We do deals that make sense but there’s certainly competition.”
In 2009, LaBella said the bank would win loans after one proposal but that now customers are making proposal requests to three or four banks.
LaBella said he can tell there are more banks lending but that he also thinks customer demand is improving. There’s more certainty about health care costs and taxes now that the presidential election is over, he said. Additionally, both businesses and banks have had to adapt in the last few years, making it easier for a loan application to be successful. Businesses have learned how to maintain strong operating foundations and banks are utilizing more tools to help businesses secure loans through the U.S. Small Business Administration and development authorities.
“Companies are being smarter about how they manage their business and banks are looking at other resources about how to structure a loan,” La Bella said. “The challenge is to put money out into the communities we serve. … It’s certainly where you’re going to get a higher return.”