SLOOS
In the first quarter of 2024, credit demand diverged, with consumer loan demand falling and review standards tightened, and real estate-related loan demand rebounding, and review standards relaxed. The liquidity gap between domestic and foreign banks persists, with the spread between foreign bank lending rates and bank funding rising slightly.
Column: This time, we studied the relationship between consumer loans and retail sales, consumer confidence index, and high-frequency data on consumer loans. From the perspective of retail high-frequency data, there is a certain positive correlation between credit card loan demand and retail high-frequency data in the big cycle, but the correlation in the small cycle is not obvious. It may be because the sources of consumer funds are divided into income, savings and loans, and there is a substitution effect between short-term income, savings and loans. In addition, the high-frequency retail data of Redbook has a leading effect of one quarter on loan demand, while CART sales (excluding automobiles) have a leading effect of about two quarters, and credit card consumption has a leading effect of one quarter on credit card consumer loans. The correlation between consumer loan demand in the United States and the Michigan Consumer Sentiment Index is uncertain, alternating between positive and negative. This may be due to the resilience and income support of US consumption, and consumers may choose to borrow more to spend rather than reduce consumption outright during periods of declining confidence, so there will be a negative correlation.
The Senior Loan Officers' Survey of Opinion on Bank Lending Practices (SLOOS Survey) is a quarterly survey of up to 80 large U.S. domestic banks and 24 foreign bank branches. The Fed typically conducts surveys on a quarterly basis, based on the timing of the Fed's interest rate meetings, to discuss the results at the January/February, April/May, August, and October/November meetings of the Federal Open Market Committee (FOMC), with the Fed occasionally conducting additional surveys once or twice a year. The survey asked questions about changes in bank lending standards and terms and the state of demand for loans from businesses and households. The report, released on May 6, reflects the credit situation in the United States for the first quarter of 2024. Column: The Relationship between Consumer Loans and Retail Sales, Consumer Confidence Index, and High-Frequency Data of Consumer Loans From the perspective of high-frequency data, there is a certain positive correlation between credit card loan demand and retail high-frequency data in the large cycle, but the correlation in the small cycle is not obvious. It may be because the sources of consumer funds are divided into income, savings and loans, and there is a substitution effect between short-term income, savings and loans. In addition, the high-frequency retail data of Redbook has a leading effect of one quarter on loan demand, while CART sales (excluding automobiles) have a leading effect of about two quarters, and credit card consumption has a leading effect of one quarter on credit card consumer loans. In terms of review standards, there is an inverse relationship between the tightening of credit card review standards and high-frequency retail data.
The correlation between consumer loan demand in the United States and the Michigan Consumer Sentiment Index is uncertain, alternating between positive and negative. This may be due to the resilience of U.S. consumption and the fact that it is supported by incomes, and consumers are likely to borrow more to spend rather than reduce consumption outright during periods of declining confidence, so there will be a negative correlation. In the United States, the demand for consumer loans is highly correlated with commercial bank consumer loans, moving almost simultaneously.
1. Overall credit demand The credit demand in the SLOOS survey report is a "net percentage", which subtracts the proportion of "weaker demand" from the proportion of respondents who answered "stronger demand" in the questionnaire. The Q1 survey showed a slight decline in credit demand from medium- and large-sized businesses in the United States[1]. Commercial real estate credit demand continues to rebound. Demand for consumer loans has fallen. Among the consumer loans, the demand for auto loans and credit card loans fell rapidly, while the demand for the rest of the loans fell relatively smaller. Demand for all types of home mortgages rebounded rapidly in the first quarter, in line with the recovery in the MBA weekly loan application data.
2. Overall Review Criteria The credit review criteria in the SLOOS survey is "net percentage", which subtracts the proportion of "more stringent standards" from the proportion of "looser standards" in the questionnaire. In the first quarter, the review criteria for corporate loans tightened slightly, and all sub-review standards for commercial real estate loans continued to be relaxed and returned to around the historical average range. The review of consumer loans is differentiated, credit cards and other consumption continue to be relaxed, and auto loans are tightened. Screening standards for all types of residential mortgages have been relaxed. This is in line with the weakening of consumption and the stabilization of the real estate market reflected in the economic fundamentals.
3. Details of credit demand of domestic banks in the United States From the perspective of credit demand, domestic banks in the United States reported that the number of inquiries about industrial and commercial loans increased in the first quarter, but the demand of large, medium and small enterprises changed little or even fell slightly. Among the consumer loans, the willingness to installment of consumer loans increased, but the demand for loans fell, and the demand for commercial real estate loans rebounded.
Fourth, the details of the review standards of domestic banks in the United States Judging from the detailed data, the cost of industrial and commercial loans has fallen, the use of the lower limit of interest rates has fallen, and the collateral requirements have also fallen. There is a differentiation within consumer loans, with the minimum credit score for auto loans tightened, but the minimum down payment requirement relaxed, loan spreads falling, the minimum scoring standards for credit card loans tightened, the rest of the standards relaxed, and the rest of the consumer loan review standards relaxed. Compared with the previous quarter, most loan review standards were relaxed, but the minimum scoring standards for consumer loans were mostly tightened.
5. Credit demand and review details of foreign banks In terms of foreign banks, the demand for industrial and commercial loans and the number of inquiries rebounded to more than 0% in the first quarter.
In the first quarter, there was a slight increase in the interest rate differential between different sub-items of foreign banks' audit standards, with the use of the lower limit of interest rates unchanged, the increase in mortgage requirements and the increase in premium collection, and the interest rate differential between foreign bank lending rates and bank funding costs increased slightly. It may indicate that the liquidity of foreign banks has tightened at the margin. In terms of the maturity and size of loans, foreign banks diverged in the first quarter, with the maturity review criteria relaxed and the scale review criteria tightened. However, the review standards for industrial and commercial loans have been tightened overall.
Note: [1] Large and medium-sized enterprises refer to enterprises with annual sales of more than 50 million US dollars, and small enterprises refer to enterprises with annual sales of less than 50 million US dollars.
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