Survey Says

The January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices was released on Monday. No big changes or surprises in my mind.

Over 65 percent of domestic banks reported having tightened lending standards on commercial and industrial (C&I) loans to small businesses and large and middle-market firms over the past three months. Down a bit from October, but not in a material way.

About 80 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months. The fallout from the implosion of the CMBS market is becoming more evident every day. It's unlikely there will be sufficient lending capacity to re-finance the over $150 billion of commercial real estate mortgages maturing in 2009.

And as I noted last quarter, the survey also reports that interest rate floors are becoming more prevalent and loan to value ratios are decreasing.

The conclusion - credit is still tight if you're not a creditworthy borrower with lots of deposits.

The bankers with whom I speak on a regular basis confirm the status of the current lending environment. There's not yet been a push to increase business loans or commercial real estate loans to new clients notwithstanding the TARP plan. In fact, many of these loan officers are focused on gathering in new deposits or taking care of the non-borrowing needs of existing clients.

What's the next event to watch? It's not the new stimulus bill working its way through Congress though this will be critical to the economy.

Rather, watch when business borrowers start filing financial statements with their lenders for the fourth quarter. Expect many borrowers to post fourth quarter and full year 2008 losses and trip financial covenants causing a new onslaught of headaches for lenders.

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Tags : Federal Reserve , business loans , credit crunch , asset based loans , accounts receivable , hard money loans , real estate loans