Q2 2015 U.S. Banking Review: Loan Portfolios

The U.S. banking industry continues to benefit from increased lending activity over Q2 2015, with data compiled by the Federal Reserve showing that the total loan portfolio for all commercial banks swelled at an annualized rate of 7% for the period. ^[1] This follows 8.4% growth in the first quarter, and is the fifth consecutive quarter for which loans grew by more than 6%. While commercial loans remained the primary driver of this growth, the second quarter also benefited from a notable uptick in real-estate lending – something we highlighted in a recent article.

In this article, we detail the trends in the loan portfolio of the country’s largest commercial banks – JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB) and Capital One (NYSE:COF) – over recent years, and compare the proportion of different loan types in each of their loan portfolios.

See the full Trefis analysis for Wells Fargo | JPMorgan | U.S. Bancorp | Bank of America | Citigroup | Capital One

The total outstanding loans for all commercial banks in the country is one of the key economic indicators that has shown marked improvement over the years. The total loan portfolio for U.S. banks fell from a pre-recession peak figure of $7.3 trillion in October 2008 to a low of under $6.5 trillion in early 2010, before the Fed’s efforts and improving economic conditions helped this figure jump to over $8.3 trillion now. ^[1]

A commercial bank’s total loans include mortgages, credit card loans, retail consumer loans (such as auto loans and student loans), commercial and industrial loans and commercial real estate (CRE) loans. The table below captures the average size of each bank’s total loan portfolio in each of the last ten quarters. The data has been compiled using figures reported by individual banks as a part of their quarterly announcements and includes every type of loan handed out by the banks.

Notably, Bank of America has a larger loan portfolio than any of its competitors, with the banking giant witnessing growth in loans over the last two quarters after spending years streamlining its business following the ill-fated acquisition of Countrywide. In contrast, Wells Fargo has seen the largest organic growth in its loans compared to its peers over the same period. The big four banks dwarf the largest regional bank in the country, U.S. Bancorp, by a wide margin. Capital One figures at the #6 position in the list thanks to its established track record in card lending, even as recent big ticket acquisitions made it an important player in the commercial and real estate lending industry.

While there is a considerable difference in total outstanding loans for each of these banks – ranging from around $875 billion for Bank of America and Wells Fargo to $200 billion for Capital One – the relative importance of different loan categories to each bank’s business model is apparent from the chart below, which shows the proportion of mortgage, credit card, consumer, commercial and CRE loans in each bank’s portfolio in Q2 2015.

It should be noted that this chart shows only the loan proportions, and so cannot be used to compare the absolute size of loans handed out across banks. To put things in perspective, while Capital One is clearly seen as having a larger focus on credit cards compared to the other banks, its actual credit card loan portfolio ($84 billion) is much smaller than those of Citigroup ($134 billion), JPMorgan ($125 billion) and Bank of America ($98 billion).

In percentage terms, the banks that show a clear focus on a particular loan segment are Wells Fargo (with mortgages forming 37% of its portfolio), Capital One (with a 41% contribution from credit card loans), JPMorgan and Citigroup (both of which have commercial loans making up 38-39% of their portfolio). Bank of America’s loan portfolio is different from the others because two segments – commercial loans (41%) and mortgages (33%) – make up almost three quarters of total loans. But while the bank’s commercial loan portfolio has seen rapid growth over recent years, the mortgage portfolio continues to shrink due to legacy bad loans. As for U.S. Bancorp, commercial loans form a higher percentage (35%) of the bank’s portfolio compared to mortgages (28%) despite its aggressive growth in the mortgage industry when the demand for mortgage refinancing spiked in 2011-2012.

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1. Selected Assets and Liabilities of Commercial Banks in the United States, Federal Reserve Website [↩] [↩]