WASHINGTON—Banks tightened lending standards for business loans in the first quarter while demand remained largely flat, according to the latest Federal Reserve Senior Loan Officer Opinion Survey, a snapshot that points to continued caution among lenders amid economic uncertainty.
The survey found modest tightening for commercial and industrial loans to firms of all sizes, even as demand for that credit was “basically unchanged,” with banks citing a less favorable outlook, industry-specific concerns and reduced risk tolerance as key drivers.
Conditions in commercial real estate were more mixed, with lending standards generally unchanged but demand weakening for construction and land development loans, while remaining steady for other property types. Over the past year, however, banks said competition has led to easier terms across many CRE categories, including larger loan sizes and narrower spreads.
On the consumer side, banks reported little change in standards for most residential mortgages and auto and credit card loans, but demand softened across several categories, including credit cards, autos and other consumer lending. One exception was home equity lines of credit, where demand strengthened modestly.
Meanwhile, banks said they have tightened standards significantly for loans to non-depository financial institutions over the past year, even as demand from those borrowers increased across all categories—driven in part by higher liquidity needs and shifting borrowing patterns.