US banks' C&I lending activity continues to climb in Q2

U.S. banks' business lending activity continued its upward trend in the second quarter.

The industry's commercial and industrial, or C&I, loans climbed for the third consecutive quarter to a total of $2.488 trillion at June 30, marking a 3.9% jump from the end of the previous quarter and a 6.5% increase from the year-ago total, according to an analysis by S&P Global Market Intelligence.

Top performers

Among the 25 banks with the highest C&I loan balances at the end of the second quarter, 19 reported sequential increases and 21 recorded year-over-year growth.

Bank of America Corp., the largest C&I lender by total loans, reported a 5.5% quarter-over-quarter increase in the second quarter, which boosted the company's total C&I portfolio to $329.90 billion. JPMorgan Chase & Co. and Wells Fargo & Co. saw sequential rises of 1.7% and 3.5%, respectively.

Conversely, Citigroup Inc.'s C&I portfolio fell by 1.9% quarter over quarter, though it did jump 3.3% from the year-ago period.

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Delinquencies remain stable QOQ

Delinquent C&I loans for the industry held steady, totaling $25.53 billion in both the second quarter and the prior quarter. However, the second quarter total was up 3.3% from the same period in 2021 when total delinquent C&I loans stood at $24.76 billion.

The aggregate delinquency ratio for the industry's C&I loans was 1.03%, marking the second consecutive quarter-over-quarter decline for the ratio. The Goldman Sachs Group Inc. posted the largest year-over-year decrease in its C&I delinquency ratio with a 484 basis point drop.

Positive loan growth outlook

Loan growth in the C&I segment has consistently been improving over the last four quarters, and many lenders expect the trajectory to continue for rest of the year. During JPMorgan's second-quarter earnings call, CFO Jeremy Barnum said the company is seeing "quite robust" C&I growth, both in higher revolver utilization and new account origination.

According to the Federal Reserve's July 2022 senior loan officer opinion survey on bank lending practices, the majority of banks reported stronger demand for C&I loans from large and middle-market firms and "a moderate net share" of banks reported stronger demand from small firms.

Increased customer needs to finance inventory and accounts receivable, increased precautionary demand for cash and liquidity and a shift in customer borrowing from other bank or nonbank sources helped strengthen demand, according to the survey.