Nomura Securities on U.S. Banks: Digging Into Loan Growth - 4Q So Far
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Rating Summary:
20 Buy, 18 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Nomura Securities on U.S. Banks: Digging Into Loan Growth - 4Q So Far
Analyst, Brian Foran, said, "4Q Loan Growth – A Mild Positive So Far: Loan growth is tracking to just over +2% in 4Q so far, which would be the best quarter in three years. About half of this is real growth, while the other half is seasonality that reverts out in 1Q. Real growth is driven by demand in the non-real estate sector, as well as banks retaining more mortgages on balance sheet. Prospectively, there is also the potential for a share shift out of European banks as they shrink dollar assets. Specifically: Loan Growth Tracking to +2.2%: Loan growth so far in 4Q is +1.1% at large domestic banks, and is on track for +2.2% for the quarter. This would build on the +1.5% loan growth in 3Q11. Loan pricing remains a problem, but at least loan growth has been a mild positive surprise."
"Real Demand Contributes Half the Loan Growth: In prior regional real
estate depressions, loan growth bifurcates three years into the cycle with
non-real estate growing while real estate keeps shrinking. We are three
years into this cycle and the same is happening, with commercial loan
growth leading while cards finally flatten out. Real estate is shrinking but
with a wrinkle – recently banks have been retaining more mortgages."
"Seasonality Contributes the Other Half: Normal seasonality for loans
is +1% in 4Q, concentrated in December, driven by credit card growth
on the back of holiday shopping as well as year-end borrowing decisions
by commercial borrowers. This seasonal benefit does not stick around
long – normal seasonality in 1Q is loans down 1.5%."
"European Deleveraging Is a Prospective Growth Driver: European banks control about 5% of US bank loans, concentrated in commercial loans as well as leasing. Many have plans to deleverage dollar assets, and their US deposit bases have notably declined. This creates an opportunity for US banks particularly mid-major banks such as U.S. Bancorp (NYSE: USB), PNC Financial (NYSE: PNC) and Wells Fargo (NYSE: WFC) who are big enough to serve large corporate borrowers and are now able to replace Europeans as they pull out."
Analyst, Brian Foran, said, "4Q Loan Growth – A Mild Positive So Far: Loan growth is tracking to just over +2% in 4Q so far, which would be the best quarter in three years. About half of this is real growth, while the other half is seasonality that reverts out in 1Q. Real growth is driven by demand in the non-real estate sector, as well as banks retaining more mortgages on balance sheet. Prospectively, there is also the potential for a share shift out of European banks as they shrink dollar assets. Specifically: Loan Growth Tracking to +2.2%: Loan growth so far in 4Q is +1.1% at large domestic banks, and is on track for +2.2% for the quarter. This would build on the +1.5% loan growth in 3Q11. Loan pricing remains a problem, but at least loan growth has been a mild positive surprise."
"Real Demand Contributes Half the Loan Growth: In prior regional real
estate depressions, loan growth bifurcates three years into the cycle with
non-real estate growing while real estate keeps shrinking. We are three
years into this cycle and the same is happening, with commercial loan
growth leading while cards finally flatten out. Real estate is shrinking but
with a wrinkle – recently banks have been retaining more mortgages."
"Seasonality Contributes the Other Half: Normal seasonality for loans
is +1% in 4Q, concentrated in December, driven by credit card growth
on the back of holiday shopping as well as year-end borrowing decisions
by commercial borrowers. This seasonal benefit does not stick around
long – normal seasonality in 1Q is loans down 1.5%."
"European Deleveraging Is a Prospective Growth Driver: European banks control about 5% of US bank loans, concentrated in commercial loans as well as leasing. Many have plans to deleverage dollar assets, and their US deposit bases have notably declined. This creates an opportunity for US banks particularly mid-major banks such as U.S. Bancorp (NYSE: USB), PNC Financial (NYSE: PNC) and Wells Fargo (NYSE: WFC) who are big enough to serve large corporate borrowers and are now able to replace Europeans as they pull out."
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