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TEXT-Fitch on C&I Loan Performance
March 14, 2012 / 6:48 PM / 6 years ago

TEXT-Fitch on C&I Loan Performance

(The following statement was released by the rating agency)

March 14 - According to a new report, Fitch Ratings does not believe near-term performance of commercial and industrial (C&I) lending has rating implications for Fitch’s U.S. bank-rated portfolio, despite some expected credit deterioration of the loans. Banks have sought to reduce their reliance on commercial real estate and stressed residential-related loans, striving for more diversification and a higher proportion of business loans as a result of the most recent real estate-driven recession. Fitch notes that every bank has cited an emphasis on growing C&I as a strategic pursuit. Fitch expects deterioration from the currently low levels of delinquent and noncurrent C&I loans and some reversion to the historical averages. Any deterioration will be readily absorbed by banks given historically high levels of capital and loan loss reserves. Accordingly, Fitch does not foresee an affect on ratings in the aggregate. For the period of 4Q‘11 versus 4Q‘10, C&I loans grew 14% among all FDIC-insured institutions, while construction and land development loans fell 25% and home equity declined 5%. The recent growth followed seven previous quarters of declining growth in C&I balances. Among the largest U.S. banks, loan growth was mainly attributable to growth in new customers versus a material increase in utilization. Fitch also notes that some banks benefited from dislocation in Europe. Larger banks also generated strong loan growth from corporate syndicate lending. Despite some relaxation in terms and conditions, banks have been reporting an improving trend since 3Q‘09 in C&I noncurrent loans, NCOs, and past due loans. The most recent figures not only reflect an improving trend, but are also below the long-term averages. Since some of the recent performance is potentially skewed by loan growth, looking ahead, Fitch will adjust for this growth in measuring C&I asset quality by analyzing lagged figures. The full report ‘U.S. Banks’ C&I Lending Trends’ is available at ‘’ (Caryn Trokie, New York Ratings Unit)

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