The severe and extended decline in oil prices and a slowdown in consumer activity sapped some of the banking industry’s momentum in January, according to respondents surveyed for the latest American Banker’s Index of Banking Activity (IBA).
The overall index registered 52 in January, a drop from December’s 54.9 and January 2014’s 53.7. This latest reading, although still barely indicative of expansion, is the lowest since the index’s launch in 2012.www.americanbanker.com/IBA-FEB15
In characterizing business conditions for the most recent month, “several participants pointed to noticeable stress on oil-service companies, evident in the form of layoffs and reduced borrowing,” said Rich Melville, Group Editorial Director of Banking & Capital Markets for SourceMedia.
The IBA tracks the level of business activity across a range of factors fundamentally important to the commercial banking business. Composite readings above 50 indicate an expansion of activity and readings below 50 point to contraction. The farther from 50 a reading is, the stronger the indicated change.
The IBA is a product of American Banker's regular surveys of banking executives. The latest installment of the index was based on nearly 300 responses to surveys.
BANKING INDUSTRY CONDITIONS
Consumer lending activity displayed weakness for the month with the index component that tracks consumer loan applications registering a reading of 45.5 and the one tracking approvals coming in at 47.7. “This revealed retrenchment for the first time in a year,” Melville said, and respondents in the New England area were most likely to point to weather as a contributing factor in business activity. For context, however, the readings were not as weak as a year ago, when much of the U.S. was in the grip of a massive winter storm (and the loan application indicator plunged to a level of 41).
Commercial loans, however, continued to accelerate despite decreased borrowing in the energy sector. Loan applications scored 51.5 and approvals scored 52.
HOW THE INDEX WORKS
The Index of Banking activity is a diffusion index made up of 11 equally weighted sub-indicators that summarize various business activities, such as loan activity (e.g. applications, approvals, delinquencies and loans outstanding), loan pricing, deposit account activity, staffing, and business and real estate conditions.
Respondents are asked whether each sub-indicator increased, decreased or had no change from the previous month. Responses do not include opinions, intentions or expectations, although bankers were given the opportunity to comment about market conditions.
About American Banker Research
American Banker Research is a unit of American Banker, the flagship information brand of the diversified B-to-B media company SourceMedia. American Banker Research brings a full range of professional research capabilities to companies and executives in banking and payments. The unit manages the American Banker Executive Forum, a community of senior banking and payments executives who are committed to regularly sharing opinions and insights with the editorial and research groups at American Banker. Members include qualified professionals who read American Banker and its sister brands Bank Technology News and PaymentsSource, and attend their professional conferences. These include C-level executives and other senior professionals employed at commercial and community banks, bank holding companies and other financial companies across all asset classes.
SourceMedia, an Observer Capital company, is a diversified business-to-business digital media company serving senior professionals in the financial, technology, and healthcare sectors. Brands include American Banker, The Bond Buyer, Mergers & Acquisitions, Financial Planning, On Wall Street, Accounting Today, Health Data Management, and Employee Benefit News.
For more information, please contact:
Executive Marketing Director