Expect to See Flat Loan Growth in 3Q

Although Alcoa will unofficially kick off earnings season after the close this evening, 3Q earnings season will really start to get under way on Friday when $JPM and $WFC report results.

Looking at the Fed’s H.8 report on the banking system as a whole, investors should not be caught off guard to see weak loan growth at the big banks.  Systemically, quarterly loan growth has been slowing since 2011 and has now fallen flat.  In fact, loans actually contracted in August and September.  This includes loans to Commercial and Industrial borrowers, which also fell in consecutive months.

Weak loan growth, especially to the business sector, is not the type of thing you’d like to see at this stage of an economic cycle.  Perhaps this data is part of the reason that bank stocks have been relative laggards lately.

Loan Growth at Commercial BanksSource: Federal Reserve

 

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