Patience, and we may yet see factories and mines reopen, Main Street shops and neighborhood industrial parks grow confidently, and other promised fruits of the pro-business government Americans elected last fall.
Just not yet. Business borrowing "has slowed some" in the Philadelphia area since Christmas, bank analyst Frank Schiraldi told clients of Wall Street investment-banking firm Sandler O'Neill + Partners in a report Wednesday.
At Beneficial Bank, the largest bank with headquarters in Philadelphia, the current loan "pipeline is at about 70 percent of year-ago levels," and other banks also reported a slowdown, Schiraldi wrote, citing managers' remarks to Wall Street investors at a conference last week. He said they confirmed recent Federal Reserve data projecting "a broader slowdown" this year.
Separately, Philadelphia-area industrial employers continue to close. Last month, Axeon Specialty Products said it is shutting its Paulsboro asphalt refinery, once the largest of its kind, laying off 115 workers in an area already pocked with shuttered oil and chemical plants alongside bustling food and drug warehouses.
And Philadelphia-based PaperWorks LLC, controlled by 76ers co-owner Marc Leder's Sun Capital buyout fund, is shutting its historic Manayunk plant, idling 147. That's the latest, and possibly final, step in a twisted financial path that has given that mill a string of debt-funded owners in the last 30 years, each squeezing profits from an aging industry.
Philadelphia-area business remains generally "healthy," with borrowers paying back on time; Beneficial still expects net loan growth, just not as much as in the previous couple of years, Schiraldi concluded in his report.
If banks can't make more money lending to business, they can at least resume buying one another: Bank-watchers expect dealmaking will pick up, in hopes President Trump and Congress will make good on pledges to cut business taxes and ease regulations imposed after the industry wrecked itself in 2008.
Last week, First Bank of Hamilton, N.J., agreed to pay a modest $27 million for roughly $200 million-in-assets Bucks County Bank and its four offices. First Bank will cut costs by 40 percent to make the deal profitable, noted Merion Capital Group analyst Joe Gladue.
Beneficial also is looking for banks to buy, analyst Schiraldi noted, after digesting Conestoga Bank (including former State Sen. Vince Fumo's old Pennsylvania Savings), cutting its costs 40 percent, and closing six branches.
On a larger scale, Wells Fargo, the dominant commercial bank in Philadelphia and many other U.S. metro areas, is struggling to start growing again after phony-account scandals forced CEO John Stumpf from office last year.
On Wednesday, Wells Fargo agreed to pay $110 million to resolve lawsuits on its longstanding practice of paying branch employees for landing new business, which resulted in thousands of phony, unauthorized accounts.
"This agreement is another step in our journey to make things right with customers and rebuild trust,” said Wells Fargo CEO Tim Sloan, Stumpf's replacement. This class-action settlement, following last year's $190 million settlement with Los Angeles and federal regulators, was for "much less than we would have expected," analyst Brian Kleinhanzl wrote in a report to clients of Keefe Bruyette & Woods, New York. Early refunds worked out to about $25 a customer.
Bank-watchers are more worried about Wells Fargo's slowdown in new accounts since it stopped paying branch workers bonuses to find them by whatever means necessary. Wells Fargo added accounts equal to just 1.9 percent of its previous business in February, down from 5 percent a year ago, before the scandal, noted analyst Kleinhanzl.
The bank plans new marketing, and new incentives. A failure by Wells Fargo to restart growth could result in significant branch closings.
Wells Fargo boss Sloan also said he was "disappointed" by his bank's new rating under the federal Community Reinvestment Act, which requires banks to make services available in poor neighborhoods as well as rich ones. The bank was downgraded to "Needs to Improve" from its previous "Outstanding" rating by the Office of the Comptroller of the Currency.
In the Philadelphia area, the federal examiners found, for example, that Wells Fargo's home-purchase lending in poor neighborhoods "is significantly lower" than existing homeownership rates in those same areas.
Yet overall, examiners concluded the bank's loan record in metro Philadelphia was "excellent," and for all Pennsylvania was "satisfactory."
The nationwide "Needs to Improve" rating, due in part to the large number of consent decrees in which Wells Fargo has admitted wrongdoing and promised to do better, "puts some restrictions" on Wells Fargo's ability to buy other banks, wrote analyst R. Scott Siefers in a report to clients of Sandler O'Neill.
But "we did not expect Wells Fargo & Co. to engage in much M&A at this point, anyway," so the effect of the government slap "will likely be negligible," Siefers concluded.