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Small Business Lending Down In 2012,but Big Banks Continue To Lead The Market

By Harish Mali, SNL Financial

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.

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.

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.

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.

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