What Is The Breakup Of Outstanding Loans Across The U.S. Banking Industry By Loan Type?

Residential mortgages, commercial & industrial (C&I) loans and commercial real estate (CRE) loans together form almost 70% of all outstanding loans for the U.S. banking industry.

* Credit card loans include unsecured revolving credit, while retail loans include auto loans, student loans and other secured consumer loans. Other loans comprise of loans to financial institutions as well as the lending of federal funds and reverse repurchase agreements.

The U.S. banking industry has witnessed a brisk ~8% growth in total loans between Q3 2015 and Q3 2016. While CRE loans have seen the largest growth of over 11% for this period, the sluggishness in the mortgage industry has resulted in outstanding home loans only increasing by 4% year-on-year.

The notable rate of growth – especially in CRE and C&I loans – stems from the prolonged low interest rate environment that has been prevalent since the economic downturn of 2008. While easy availability of cheap credit has spurred the demand for loans, a steady improvement in economic conditions has also made individuals and companies optimistic about the future – driving loan demand further. As the U.S. economy is expected to continue to improve, loan growth is likely to continue (albeit at a slower rate) once the Fed resumes its rate hike process early next year.

The chart below captures Bank of America’s portfolio of outstanding business loans and includes our forecast for these loans. You can see how changes to these loans affect our estimate for the bank’s shares by modifying this chart.

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