The largest US banks are pessimistic about a near-term rebound in loan growth after more weak performance in the fourth quarter of 2023.

Median sequential loan growth during the period was 0.9% across the 15 biggest banks, according to data from S&P Global Market Intelligence. Despite a seasonal tailwind during the period, elevated interest rates weighed on borrower demand and banks continued to tighten standards across a variety of loan categories.

"Loan growth is a dog fight right now," Bank of America Corp. Chairman and CEO Brian Moynihan said at a Feb. 21 conference, pointing to commercial line utilization rates that have failed to recover to pre-pandemic levels. "The commercial customer [is] a little more conservative between geopolitics, wars, supply chain normalizing and then getting disrupted and then normalizing and getting disrupted. They're worried about final demand."

Trimming commercial expectations

PNC Financial Services Group Inc. pulled back on its guidance for the first quarter, forecasting a sequential decline in average loans of about 1%, compared with its prior projection for stable average loans.

"That's fully a function of utilization rates," CFO Robert Reilly said during a mid-February conference presentation.

Commercial and industrial (C&I) loans dropped by a median 0.3% across the biggest banks in the fourth quarter of 2023.

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C&I loans across domestically chartered banks were down by another 0.2% from Dec. 27, 2023, through Feb. 21, according to weekly data from the Federal Reserve.

While economic growth may be slowing, investor expectations for a soft landing have fueled stock market gains and banks are looking for stronger loan growth later this year.

PNC's Reilly said the downshift in the first quarter is not enough to alter the bank's annual outlook. The CFO stood by guidance for ending period loan growth of 3% to 4% for 2024.

Consumer opportunities

Consumer lending was a relatively strong area for banks once again, growing by a median 0.6% across the biggest banks in the fourth quarter of 2023.

JPMorgan Chase & Co., which posted a 5.7% increase in the last three months of 2023, projected that its credit card loan growth would cool from last year's pace but remain above normal in 2024. CFO Jeremy Barnum reiterated that outlook on Feb. 27, saying the increases are being helped by some ongoing normalization in the amount of balances customers carry from month to month, as well as marketing spending to add new accounts.

At Truist Financial Corp., consumer loans declined 2.9% sequentially in the fourth quarter of 2023, but the bank said the massive capital infusion from its decision to exit the insurance brokerage business will enable it to go back on offense after a period of retrenchment where it focused on loans to customers with broad relationships and controlling risk-weighted assets.

"Just because the relationship value of a certain business might be lower in one of our national consumer lending businesses, it doesn't mean it's not a good business," CFO Michael Maguire said Feb. 21. "It doesn't mean it's not a profitable business."