"Credit quality has stabilized," and banks have already set aside billions they'll need to cover years of construction loans that have gone bad - but there aren't enough "lending opportunities nor attractive securities yields" in the U.S. to put their surplus cash to work in the meantime, Janney Capital Markets analysts Rick Weiss, Stephen M. Moss and David C. Peppard told clients in a report this morning.
At 12 of the largest US banks, total loans fell around 2 percent in March-April-May from last winter, and 4 percent from a year ago. The drop was a little sharper at PNC, the biggest bank based in Pennsylvania, and Wells Fargo, the biggest bank in the Philadelphia area.
Among 21 midsized banks, the drop was around 1 percent for the quatrer,but 8 ercent from a year ago (and a little higher than average at troubled Wilmington Trust). At 36 smaller community banks, lenders did a better job keeping loans on the books; total lending for the group was flat, and actually grew in the second quarter at Metro Bank of Harrisburg, Univest of Souderton, and Sun Bank fo Vineland, though it was down at National Penn, First Republic and Susquehanna.
Among a group of savings banks, lending was actually up slightly - but that includes the impact of mergers like First Niagara Financial's purchase of Harleysville National, which the folks at Janney didn't back out of the numbers. Bottom line: they're not predicting banks will make more loans anytime soon.
Meanwhile, bank share values are all over the map, and Janney is recommending a few stocks, inlcuding PNC, that offer "a history of conservative management" and particular "competitive advantages" - in PNC's case, that means the ability to absorb small, troubled banks, cheap.