US banks' commercial and industrial lending during the third quarter was subdued amid weaker demand from firms of all sizes.

The industry ended the quarter with a total of $2.499 trillion in commercial and industrial (C&I) loans, almost the same as a quarter ago and up just 0.7% from a year earlier, according to S&P Global Market Intelligence data. Gross loans and leases, meanwhile, grew 2.2% year over year.

C&I loans accounted for 19.8% of US banks' gross loans and leases as of Sept. 30, compared to 19.9% as of June 30 and 20.1% a year ago.

Lending standards, demand

The Federal Reserve's October 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that lending standards for C&I loans to large and middle-market firms were "basically unchanged" while terms for C&I loans to small firms tightened over the third quarter, particularly for premiums charged on riskier loans.

Banks cited a less favorable or more uncertain economic outlook, the worsening of industry-specific problems and a reduced tolerance for risk as the main reasons for tightening standards for lending.

Respondents to the Fed's survey reported weaker demand for C&I loans to firms of all sizes. Some banks also reported a decrease in the number of inquiries from potential borrowers regarding the availability and terms of new credit lines or increases in existing lines.

The most frequently cited reasons for weakening demand were decreases in customer investment in plant or equipment, customer inventory financing needs, customer accounts receivable financing needs, and customer merger or acquisition financing needs.

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Delinquency uptick

Delinquent C&I loans at US banks rose in the third quarter to $29.18 billion, from $28.23 billion in the second quarter and $23.99 billion a year ago. The delinquency ratio ticked up to 1.17% from 1.13% in the second quarter and 0.97% a year earlier.

For total loans and leases, the delinquency ratio was 1.54%, up from 1.47% in the previous quarter and 1.36% in the year-ago quarter.

Top C&I lenders

The US banking industry's top nine C&I lenders in the third quarter were unchanged from a year earlier: Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., PNC Financial Services Group Inc., U.S. Bancorp, Truist Financial Corp., American Express Co. and BMO Financial Corp.

Capital One Financial Corp. beat Fifth Third Bancorp to 10th place, as the latter's C&I loans fell 8.3% year over year.

Among the top 25 C&I lenders for the period, Wintrust Financial Corp. booked the biggest year-over-year increase in C&I loans of 13.4%, followed by John Deere Capital Corp. with a 10.6% rise.

Truist posted the biggest year-over-year decline of 11.7%, followed by Citizens Financial Group Inc. with a 10.3% decrease.

Goldman Sachs Group Inc. recorded the biggest year-over-year increase in C&I delinquency rate, with the metric rising 176 basis points to 6.65%. Morgan Stanley, with a delinquency rate of 3.15%, logged the second-largest year-over-year increase of 99 basis points.