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C&I loan growth sputters in fourth quarter, H.8 data shows

Commercial banks' loans and leases increased by just 4.4% year over year in December 2019 due to weakness in commercial-and-industrial lending, according to the Federal Reserve's latest estimate of commercial banks' seasonally adjusted balance sheets.

The December report represents a slowdown from prior months in 2019 and from the loan growth rate in December 2018 when loans were up 5.1% year over year, according to the Fed's H.8 report filed Jan. 10.

Softness in loan growth was driven by a decline in commercial and industrial loans. The Fed estimated that C&I loans fell by an annualized 1.6% during the quarter, the weakest quarterly growth figure since the 2017 first quarter. It was the weakest fourth quarter for C&I quarterly growth since 2009.

On the other hand, real estate lending was stronger in the fourth quarter, the data shows, driven by commercial real estate. The Fed estimated CRE loans grew by 5.8% in the 2019 fourth quarter, up from 3.9% in the linked quarter and 4.0% in the fourth quarter of 2018. Residential real estate loans grew by 2.3% in the fourth quarter, consistent with 2.3% in the prior quarter and up from 1.4% in the fourth quarter of 2018.

The H.8 data is released weekly and is based on a sample of approximately 875 commercial banks, including commercial bank subsidiaries and branches of non-U.S. companies. The Fed uses call report data to estimate the industry's total balance sheet size based on the sample banks' data. Commercial banks have until the end of January 2020 to file fourth-quarter call reports.

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