By Dan Burns
(Reuters) - JPMorgan Chase & Co (NYSE:JPM), the largest U.S. bank and often heralded as a bellwether for the economy, on Wednesday reported an eye-popping increase in its profit for the first quarter.
Absent from the results, however, was firm evidence that consumers and Main Street businesses are itching for more credit, after a year of pandemic-induced hibernation, to fuel further growth in the economy.
Indeed, the bank credit picture as the first quarter ended was decidedly mixed, according to U.S. Federal Reserve data, with some indications that consumer credit demand is coming back to life but demand for bread-and-butter business loans remains lacking.
U.S. consumer credit - https://graphics.reuters.com/USA-ECONOMY/BANKS/xklpyydddpg/chart.png
CONSUMER CREDIT
The Fed's most recent data on consumer credit overall dates from February, which saw the strongest growth - nearly $27.6 billion - in three years. At more than $4.2 trillion overall, it has more or less climbed back to its pre-pandemic record level from February 2020.
Credit card balances are ticking higher - https://graphics.reuters.com/USA-ECONOMY/BANKS/jbyvrwkqgpe/chart.png
CREDIT CARDS
The Fed offers a weekly snapshot of U.S. commercial banks' balance sheets, and for most of the last year that showed consumers had been doing one thing with their credit cards: paying them off.
Outstanding balances on bank-sponsored credit cards tumbled by roughly $115 billion between March 2020 and February 2021.
Since then, though, balances have ticked up by about $10 billion and are their highest since early December.
Auto loans have been a source of strength - https://graphics.reuters.com/USA-ECONOMY/BANKS/qmypmlkbbvr/chart.png
AUTO LOANS
Car loans have been a surprising source of strength during the pandemic. Even as consumers slashed credit card spending, they did shell out for big ticket items like cars and trucks. U.S. vehicle sales recovered quite quickly starting late last spring, and auto loans from U.S. banks are at a record high.
Demand for commercial & industrial loans is weak - https://graphics.reuters.com/USA-ECONOMY/BANKS/jznpnakxmvl/chart.png
BUSINESS LOAN DEMAND
It has been a very different picture for bread-and-butter business loans. The Fed's most recent quarterly survey of bank loan officers, from January, showed only slight improvement in the business loan demand outlook as 2021 began.
Commercial & Industrial bank loans - https://graphics.reuters.com/USA-ECONOMY/BANKS/ygdpzlddepw/chart.png
C&I LOANS
That soft demand outlook may stem from the fact that businesses loaded up on loans roughly a year ago as the pandemic began, and with little to spend it on since are now flush with cash.
Early in the pandemic, the top 25 U.S. banks saw an explosion in their commercial and industrial loan books as larger companies tapped their lines of credit to ensure they had cash as the crisis unfolded.
Roughly a month or so after that, the C&I demand boom hit smaller banks as companies took out loans under the Payroll Protection Program that was part of the initial wave of pandemic relief measures enacted by Congress last year.
Since then, however, C&I loan levels have drifted steadily lower and are now their lowest in a year.
Wall Street vs Main Street - https://graphics.reuters.com/USA-ECONOMY/BANKS/bdwpkbejavm/chart.png
WALL STREET WINS
Still, there's been no shortage of credit provided overall by U.S. banks in the last year. It's just that most of it went to Wall Street rather than Main Street.
Total bank credit, at more than $15.2 trillion at the end of March, rose by more than $1 trillion in the last year. Wall Street's share of that - as represented by the percentage of securities out of total credit - shot up by around 5 percentage points in the last year and now accounts for roughly a third of all bank lending. That's another record for Wall Street.