Top U.S. commercial bankers say business customers are increasingly bullish about the U.S. economy, evidenced by higher demand for borrowing from banks.
“We see solid demand for loans as we head into 2014,” particularly from large corporations and healthcare companies, Bank of America CFO Bruce Thompson said on an earnings call Wednesday, according to a Reuters story. John Stumpf, CEO of Wells Fargo, said on his banks’s earnings call last week that more executives are planning for investment, with customers interested in “building something, adding something, investing in something.”
Federal Reserve data released Friday showed outstanding commercial and industrial loans reached $1.61 trillion at the end of 2013, topping 2008’s all-time high. A turnaround in demand for credit is also evident in the appetite that banks have for investing in loans and securities. These investments, combined with the Federal Reserve’s securities holdings, grew 8.7 percent year-over-year in the third quarter of 2013, according to Paul Kasriel, chief economist at Northern Trust. (The average growth since 1953 is 7 percent.) Kasriel told Reuters that growth in the metric usually happens one quarter ahead of a pickup in overall economic growth.
Across the pond, The Financial Times reported today that a growing number of multinationals are raising debt capital in European markets. Euro-denominated bonds from non-European companies have tripled since 2011, hitting $132 billion in 2013. Attracting companies to Europe are low funding costs, including the “cost to convert money back to U.S. dollars or other currencies,” the FT said.
Europe is also an easier market for multinationals to sell a wider range of maturities, Chris Whitman of Deutsche Bank told the FT. Bonds of 7-, 8-, 12-, 15- and 20-year maturities are more common in Europe than in the U.S. Bond issuance in euro and British pound sterling has reached $18 billion so far in January.