Despite another increase in total loans outstanding in Connecticut, few owners of small and mid-size businesses see credit conditions as good, according to a survey by the Connecticut Business and Industry Association and Farmington Bank.
Less than 15 percent of business executives responding to the CBIA survey rated current conditions as good or excellent, and just 17 percent see things getting better this spring, with the survey carrying a 5 percent margin of error.
CBIA pointed out it was still the highest percentage for both figures in more than a year, and the 36 percent of business executives who see credit conditions as fair or poor was the lowest number since the third quarter of 2008.
More than six in 10 respondents said that without access to capital they have been unable to grow or expand their business; on the flip side, only about one in five of respondents said the reduced availability of credit has had a negative impact on their business ”“ a possible signal that relatively few businesses are seeking credit at present amid a still-uncertain economic recovery.
“Credit is slowly working its way to area businesses,” said Don Klepper-Smith, chief economist and director of research at DataCore Partners in New Haven, in a prepared statement. “Credit demand is on the rise given where we are in the business cycle.”
Connecticut banks continued to hire up in the fourth quarter, meanwhile, now carrying about 900 more employees than they did a year ago according to data from the Federal Deposit Insurance Corp.
Nearly $2.4 billion more in loans and leases flooded into the Connecticut economy in the fourth quarter, FDIC reported, with total loans outstanding at year-end falling just short of $54.9 billion. Banks recorded $361 million in profits in 2010 in Connecticut, up from $197 million in 2009.
That occurred even as loan balances nationally dropped in the fourth quarter, driven by nearly a one-half decline in real estate development lending that is a major driver of bank lending and profits.
“This is going to be one of the first recoveries, I think, that is not really that much fueled by housing,” said Howard Pitkin, commissioner of the Connecticut Department of Banking, speaking in February to a committee of the Connecticut General Assembly. “Normally that”™s the propellant out of the recession or economy, and that is just not a sector that”™s got a lot of thrust right now.
“I will say that total loans in our community banks ”¦ are still growing,” Pitkin added. “The window is still open for our larger banks that (have) $10 billion or greater (in assets) ”¦ but that really has not happened yet, and we”™re speaking from a pretty weak position right now.”
Connecticut banks continued to increase lending even as the ratio of problem loans increased to nearly 3 percent of all loans outstanding, up from 2.6 percent in the third quarter. Net charge-offs for dead loans dropped slightly, however. Because banks continue to increase assets as well, the ratio of net loans and leases to assets rose only slightly.
“There is a limit to the amount that smaller loan loss provisions can contribute to the bottom line,” said Sheila Bair, FDIC chairman, in a briefing in Washington, D.C. “Going forward revenue growth will be increasingly important.
“Cleaning up balance sheets ”¦ is only a first step,” Bair added. “Now we are looking to the industry to take the next step and begin to build their loan portfolios.”
