Banks have managed to steer around trouble spots in energy, hotel and mall-related credits. But fears of further deterioration, an eviction wave or more job losses are keeping lenders circumspect.
Weak loan demand, persistently low yields and the continued struggles of sectors such as hospitality and retail are among the myriad lending challenges facing small regional banks.
Deferrals may be hiding credit issues, leading lenders to track deposit flows, property maintenance and other factors to gauge the true health of their portfolios.
Many consumers are taking to the highways and the water for safe getaways during the pandemic — powering one of the few bright spots in lending. However, bankers warn that boomlets usually come with distinctive credit risks.
Second-quarter data for credit quality defied conventional wisdom but experts said that these numbers are being artificially helped right now and the worst is yet to come.
The flood of liquidity that accompanied the pandemic recession isn’t likely to subside anytime soon. Banks will have to employ a mix of securities buying, hedging and other balance-sheet-management tricks to prop up margins longer than initially imagined.
To date, the Small Business Administration hasn’t acted on tens of thousands of applications that lenders have submitted since early August. However, it will begin doing so by early next week, an official says.
Loan officers surveyed by the central bank said the subpar creditworthiness of some applicants and the ability of others to find credit elsewhere are among reasons the middle-market rescue facility has fizzled.
Banks' restaurant and hotel clients in many oceanside communities are seeing an uptick in business as travelers opt for short hops over long hauls during the coronavirus crisis. But activity could slow as colder weather approaches.
Before the pandemic emptied the city, few lenders benefited from the heady local real estate market as much as regional players New York Community Bancorp and Signature Bank. Now they're becoming a case study for potential trouble from a sudden downturn in the Big Apple's property sector.
