Phoenix Lending Survey: Brighter Outlook on Domestic Lending
Results from the Q3/13 Phoenix Management “Lending Climate in America” survey show that nearly a third of lenders anticipate domestic lending to increase.
This quarter’s diffusion index, which measures lenders sentiment towards U.S. commercial lending, showed a moderate increase compared to last quarter’s significant decrease. The diffusion index increased to 27% this quarter from 18% in Q2/13. The reversal of sentiment by the lenders is a strong indication that banks are still eager to lend. The results also indicated an all-time low percentage of lenders expect to tighten loan structures and raise lending spreads. This confirms the general lack of lending opportunities in the marketplace, which are likely to lead to more aggressively structured and priced loans.
In addition, it is clear the rebound in home prices and rise in interest rates have lenders worried about the state of housing. When asked to choose two factors that could have the strongest potential to negatively affect the economy in the next six months, 53% chose a sluggish housing market compared to 32% in the previous month. The U.S. budget deficit was the second greatest response, with 47% of those polled showing concern (53% chose this factor in the last survey). Stability in the stock market, unstable energy prices and constrained liquidity in the capital markets rounded out the remaining risk factors with 16% of total responses.
“Despite the recent government shutdown, falling consumer spending and domestic interest rates rising, lenders continue to seek out opportunities to put capital to work. The lack of lending opportunities appears to be a function of a conservative and uncertain outlook on the part of their borrower’s, who remain very cautious with their expansion and acquisition activities,” said Michael Jacoby, Phoenix Managing director and shareholder. “At some point we would expect the demand for loans to catch up with the existing over-supply.”
To see the full results of Phoenix’s “Lending Climate in America” Survey click here.