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Christopher Menkin
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Christopher "Kit" Menkin is of editor LeasingNews.org (http://www.leasingnews.org/), an internet trade publication for the finance/leasing industry. He has 41 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on... More
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  • Small Business Lending Down In 2012,but Big Banks Continue To Lead The Market 2 comments
    Mar 20, 2013 12:01 PM

    By Harish Mali, SNL Financial

    (click to enlarge)

    The largest banks continued their reign over small business lending in 2012. Aggregate small nonfarm business loans at US commercial and savings banks stood at $539.7 billion at the end of 2012, down by $10.9 billion or 2% compared to 2011. Banks with greater than $10 billion in assets remained the largest holders of nonfarm small business debt with a market share of 45% at Dec. 31, 2012, compared to 39% at June 30, 2005, and 22% at June 30, 1995.

    Most of that growth in market share came at the expense of smaller banks with less than $1 billion in assets. Their market share stood at 34% in 2012, down significantly from 41% at June 30, 2005 and 51% at June 30, 1995.

    (click to enlarge)

    Aggregate small business loans at banks with total assets between $1 billion to $10 billion grew by 3.75% in 2012. However, those banks with more than $10 billion in assets actually saw a decline in their aggregate balances of 1.79% for the year. The smallest banks, those with less than $1 billion in assets, reported a 1.03% gain for the year with most of that growth coming from loans of between $250,000 and $1 million.

    (click to enlarge)

    SNL's analysis shows that commercial and savings banks with greater than $10 billion in assets have more than quadrupled their nonfarm business loans portfolio since 1993. Aggregate nonfarm business loans at these banks amounted to $1.5 trillion at Dec. 31, 2012, compared to $283.4 billion in 1993. On the contrary, the growth rate for midsized banks with $1 billion to $10 billion of assets and smaller banks with less than $1 billion in assets is only 60.4% and 67.1%, respectively.

    (click to enlarge)

    The number of small nonfarm business loans has also more than quadrupled since June 30, 1995. 18.2 million loans were outstanding at Dec. 31, 2012, up from 15.7 million in 2011 and 15.1 million in 2010.

    Perhaps not surprisingly then, the top 15 small nonfarm business lenders are large banks. Wells Fargo Bank NA continued atop the rankings with a small nonfarm business loan portfolio of $32.8 billion at Dec. 31, 2012, followed by Bank of America NA and JPMorgan Chase Bank NA, with $26.2 billion and $19.8 billion, respectively.

    Wells Fargo Bank NA also holds the second position on the list of largest small farm lenders, while the top slot is occupied by Madison, Wis.-based John Deere Financial F.S.B., a banking subsidiary of the heavy equipment manufacturer, Deere & Co. John Deere Financial's $1.3 billion small farm loan portfolio represented more than two-thirds of its total assets at the end of 2012. Interestingly, more than half of the companies on the list were midsized companies with total assets of $1 billion to $10 billion at Dec. 31, 2012.

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • MelanieUp
    , contributor
    Comment (1) | Send Message
     
    Interested figures. I wonder if this is a similiar case here in the UK, where bank lending figures are down!

     

    Mel,
    Capiota
    22 Mar 2013, 12:57 PM Reply Like
  • Christopher Menkin
    , contributor
    Comments (78) | Send Message
     
    Author’s reply » I am not on top of the finance industry out of the United States, and
    really am not on top of Canada, where I see Element Financial building too fast to be true, but really don't know. I watch how charismatic personalities such as Gordon Gecko in the movie "Wall Street" lead investors in seeing the emperor wearing clothing.

     

    This report has many facets and is not simple to read.

     

    The charts in the article show an increase in large loans, meaning more money is being lent, and by the larger banks, who are in this marketplace, where the regional and community banks are not. The profits to the banks are up compared to three years ago.

     

    The charts do not show the size of the loans, meaning the loans under $100,000 for business are quite less, as are the $250,000 and many of these are not just the size, but perhaps safety in the margin that the bank charges. This "small ticket" marketplace (considered by banks as under $250,000) is more for the "C" and "D" or as you know, the new businesses, the companies that are "B" but require a larger loan or lease than they would qualify for in the major banks, who are financing other financial institutions who take this type of transaction.

     

    This financing is also in their loan portfolio, and while the profits and dollars are higher, the actual individual loans are down as they are being taken by others, many who the banks finance and are counted in the large loans.

     

    So they are lending more, but not directly...

     

    The reality is there are more payday loans, cash advance, high rate business loans, subprime lenders doing extremely well here in the United States, meeting the demand. If you can increase your profit, improve your cashflow, the rate is not as important as having access to improving your business with more advertising, more product, more inventory, better service, and improving your margins.

     

    The small loan and lease marketplace is seeing more business with non-bank enterprises.

     

    If the banks were lending more, these companies would not be growing as much as they are, as well as being well received by their customers!

     

    So large loans are up,and also are feeding indirectly the small loans who get a great return for the risk. The same may be true in UK and other countries and to put this all in a two page report really does not give you a full analysis.

     

    Not meaning to talk out of the other side of my mouth, I find the
    report very interesting, informative, and in a short space, very
    good reporting. I wish more people in the industry would read
    it and think about it, as you have.

     

    23 Mar 2013, 11:59 AM Reply Like
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