Regional Lender Loan Crash: Nearly Every Major Regional Bank Missed Lending Estimate

In addition to a miserable performance in the auto sector and a very poor GDP report, the Trump Era Brings Rare Drop in Loans at America’s Regional Banks.

Bank stocks have climbed since Donald Trump was elected president as investors bet his pro-growth agenda and rising interest rates would help lenders generate huge profits. But this month, executives at some of the country’s largest regional banks said customers, especially corporations and small businesses, are instead waiting for details on the new administration’s proposals and results before seeking financing for expansion.

Total loans at the 15 largest U.S. regional banks declined by about $10 billion to $1.73 trillion in the first quarter, compared with the previous three-month period, the first such drop in four years, according to data compiled by Bloomberg. All but two of those banks missed analysts’ estimates for total loans, as a slump in commercial and industrial lending sapped growth.

“The optimism and the willingness is there, but it has not yet translated into actions or behaviors,” Beth Mooney, chief executive officer of KeyCorp, said of the Cleveland-based bank’s small and middle-market business clients. “We did not see ‘flip the switch’ sort of behavior that led to loan demand or making different capital decisions or investment decisions.”

Nonsensical Statement of the Day

“The optimism and the willingness is there, but it has not yet translated into actions or behaviors,” said Beth Mooney, chief executive officer of KeyCorp.

Excuse me for pointing out the obvious, but if willingness was present, there would have been more loans.

Mainstream media and most economists are banking on consumer confidence sentiment, regional manufacturing sentiment, ISM sentiment, and now small business loan sentiment.

Sentiment Indicators

It’s time to throw the sentiment idea in the ash can where it belongs.

1. April 28: Economists Expect 2nd-Quarter Recovery: Investigating the 1st-Quarter Weakness Theory
2. March 21: Consumer Sentiment Statistical Noise: Modern Day Snake Oil
3. March 28: Consumer Confidence Strongest Since December 2000: A Strong Contrarian Indicator?
4. April 13: Econoday Parrot Squawks Again after Sentiment Rebounds to 17-Year High

Mike “Mish” Shedlock