Big Banks in U.S. Reduce Lending

Many of the biggest U.S. banks continue to reduce how much of their collective balance sheets is allocated towards loans, according to Federal Reserve data. The share of total assets devoted to loans across the country’s 25 largest banks is 45.8 percent, the lowest it has been in almost 36 years of weekly data.

American Banker emphasized that total loans across the biggest banks make up less than 46 percent of combined assets, which decreased from 54 percent in February 2020. The values provide a reality check for the industry, as it has been highlighting its support for consumers and businesses throughout the COVID-19 pandemic.

The biggest banks in the U.S. have quickly broadened other parts of their businesses, like government-backed mortgage securities and their Treasury holdings. Big-bank balance sheets have expanded to $12 trillion after the Fed provided an influx of cash to keep credit flowing to the economy, which has been used by banks to purchase securities supported by the federal government.

Loans fell to $5.5 trillion from last year, which includes new loans backed by the Small Business Administration. For the first time since May 2020, loans have accounted for less than half of larger banks’ balance books, and lending has fallen to a record low 21 times since then.

Throughout the pandemic, lending has received criticism and scrutiny as banks retrench, and both households and small businesses have had more difficulty obtaining reasonably priced credit.