How Have The Loan Portfolios Of The Largest U.S. Banks Changed Since 2012?
The five largest U.S. banks together managed a loan portfolio of just over $3.6 trillion in 2016 – a sizable improvement from a loan base of $3.26 trillion for full year 2012. The following table shows average loans for each bank since 2012, as detailed in their annual SEC filings.
The loan base of the five largest U.S. banks has grown 3% annually since 2012. However, data compiled by the Federal Reserve shows that total loans handed out by all U.S. commercial banks increased from $7.1 trillion in 2012 to over $8.9 trillion in 2016 – indicating an average annual growth figure of almost 6%. Notably, U.S. Bancorp, Wells Fago and JPMorgan Chase have witnessed loan growth that is largely in line with that for the overall industry. While Bank of America’s loan portfolio has fluctuated around $900 billion over this period as it worked through the poor-quality legacy mortgage assets it acquired from Countrywide, Citigroup has seen a reduction in its loan base due to its decision to sell several international retail banking units even as negative exchange rate movements impaired foreign loan value in dollar terms.
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The single biggest factor behind the spurt in loans handed out by U.S. commercial banks since 2010 is the prevailing low interest rate environment since the economic downturn. Although the Fed hiked benchmark interest rates on two occasions since December 2014, retail as well as institutional investors still have access to cheap credit because of which loan growth has remained strong. With the Fed expected to hike interest rates at regular intervals of 3-4 months through 2019, loan rates should continue to grow going forward – in turn reducing the overall rate of growth in loans outstanding for U.S. banks.
The chart below shows JPMorgan’s portfolio of commercial and industrial loans over the years and our forecast for it going forward. You can see how changes to this figure affects our price estimate for the bank by modifying the forecast.
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