NEW YORK, Nov 20 (Reuters) - U.S. banks are taking on “incredible” risk in corporate and commercial lending, offering interest rates and terms that do not reflect potential losses, BB&T Corp Chairman and Chief Executive Kelly King said on Thursday.
Intense competition in that market has led some lenders to cut pricing dramatically, he said, with some bankers again turning reckless and lending like they have in the past.
“Our corporate returns have gone down faster in the last two to three years than our retail returns because we’re killing each other,” King said at a financial conference organized by an industry group called The Clearing House. “It’s incredible the amount of risk that’s being taken.”
King said the banking industry should be more responsible, and said regulators have not been pressuring banks in commercial and corporate lending as they have with consumer accounts.
“Nobody is forcing us to drive prices down except ourselves,” King said.
U.S. commercial banks had $1.74 trillion worth of commercial and industrial loans as of October on a seasonally adjusted basis, according to Federal Reserve data. That figure was up 0.5 percent from the prior month, and up 12 percent from October 2013. Over the past five years, the market has grown 33 percent.
BB&T, a large regional lender based in Winston-Salem, North Carolina, had an average balance of $40 billion in commercial and industrial loans during the third quarter. That balance was up 5 percent from the prior quarter and 4 percent from the same period in 2013. (Reporting by Peter Rudegeair and David Henry in New York; writing by Lauren Tara LaCapra in New York)