Tatton Teaser

Posted 15 February 2024

Where next for lending standards?

The US Senior Loan Officer Opinion Survey (SLOOS) is a quarterly survey conducted by the Federal Reserve Board on bank credit availability and loan demand. It shows that lending remains tight, but fewer banks were tightening their standards (the blue area in the chart shows firm lending standards; the turquoise is consumer lending standards). Although loan demand remained subdued, standards improved.

Not back to the long-term average levels for lending standards, but the trend is positive. Interestingly, whilst banks were getting worried last year, high yield spreads were low relative to credit and wider economic conditions, so bond markets gave a good steer on the direction of the economy.

There remain plenty of risks to US credit lending standards. Auto loan balances and credit card balances amount to $1.61tn and $1.13tn, respectively. Commercial real estate is precarious – as shown by recent events concerning US regional banks, in particular, New York Community Bancorp. But. there are positives, Banks have money they are willing to lend, money supply is improving and inflation is reducing at a faster rate than wages – real disposable incomes are rising. 

Is the key US story for 2024 a return to credit demand? Not good news for longer-term rates, but if the tighter lending conditions ease, this may be good news for the US economy.

Thank you Dane Harrison for the analysis.

Subscribe to the Tatton Weekly Email

Get the latest news from Tatton HQ directly into your inbox every week. Packed with industry insights, our weekly mailing will keep you informed on the latest news from Tatton and beyond.

You can unsubscribe at any time by clicking the link in the footer of our emails. For information about our privacy practices, please click here.

We use Mailchimp as our marketing platform. By clicking below to subscribe, you acknowledge that your information will be transferred to Mailchimp for processing. Learn more about Mailchimp’s privacy practices here.

Important notice:

The Tatton Weekly is provided for information purposes only and compiled from sources believed to be correct but cannot be guaranteed.  It should not be construed as an offer, or a solicitation of an offer, to buy or sell an investment or any related financial instruments. Any opinions, forecasts or estimates constitute a judgement as at the date of publication and do not necessarily reflect the views held throughout Tatton Investment Management Limited (Tatton). The Tatton Weekly has not been prepared in accordance with legal requirements designed to promote independent investment research. Retail investors should seek their own financial, tax, legal and regulatory advice regarding the appropriateness or otherwise of investing in any investment strategies and should understand that past performance is not a guide to future performance and the value of any investments may fall as well as rise and you may get back less than you invested.

Any reader of the Tatton Weekly should not use it as a guide or form the basis of a decision relating to the specific investment objectives, financial circumstances or particular needs of any recipient and it should not be regarded as a substitute for the exercise of investors' own judgement or the recommendations of a professional financial adviser. The data used in producing the Tatton Weekly is for your personal use and must not be reproduced or shared.

Please select all the ways you would like to hear from Tatton Investment Management: