Senior Loan Officer Opinion Survey on Bank Lending Practices (July 2024)

Lending Standards Remained Tight, but Continue to Make Progress 

• The Federal Reserve's Senior Loan Officer Opinion Survey (SLOOS) on banks' lending practices continued to show progress, as a lower share of banks reported tighter lending standards in the second quarter relative to the first quarter of 2024 on all loan categories. 
• For Commercial and Industrial (C&I) lending to large and middle market firms, demand for C&I lending strengthened relative to the first quarter and the net share of banks that reported tighter lending standards receded to 8%. That is well-off last year's peak of 51%. In percentage terms that's an 85% decline from a year ago, as banks today don't feel the need to tighten further from what is already in train.
• On the household side, demand weakened for most loans, yet more banks reported increased willingness to make consumer installment loans especially at large banks.
• The July SLOOS included a set of special questions asking each bank to examine how lending standards today compared against their historical range since 2005. Banks reported, standards today are at the tighter end of the range for all loan categories.             

Key Implications

• Lending standards have eased since 2023, even though they remained tight relative to their historical ranges. Some businesses appear to be responding to looser conditions, with a pick-up in demand for C&I lending this June ― following a series of weak numbers since last October in year-over-year terms. 
• Concerns around the economic outlook, risk tolerance and commercial real estate valuations remained front and center. However, with the recent easing in financial conditions (e.g., the benchmark 10-year yield is down approx. 80 bps from its last quarter's peak), combined with Fed cuts slated for later this year should help ease these concerns ― supporting bank loan growth moving forward.  

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.