U.S. banks expect to tighten lending standards this year, reflecting concerns over loan performance, particularly in the consumer sector.

The Federal Reserve’s quarterly survey of senior loan officers found that significant net shares of banks expect performance to deteriorate in 2020 for both credit card and auto loans to nonprime borrowers.

As a result, 18.4% of banks said they expected to tighten credit-card lending standards, and 8.9% said they expected to tighten them for auto loans.

According to The Wall Street Journal, “Auto and credit-card loans have emerged as an area of concern over the past year, following reports by the New York Fed showing that delinquency rates on cars and credit cards have been creeping up, particularly among households with lower credit scores.”

“It could be that we’re getting a bit longer in the cycle and the labor market’s maturing,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. “Personal income growth is starting to gradually slow, [which] could be forcing some consumers to overextend a bit.”

But she added, “We’re far, far away from the conditions that existed ahead of the Great Recession.”

Modest net fractions of banks also expect to tighten standards this year on commercial and industrial loans to large and medium-market firms and also on nonfarm nonresidential commercial real estate loans. Banks expect performance to deteriorate somewhat for all types of business loans surveyed except multifamily CRE loans, for which performance is expected to remain unchanged.

For the fourth quarter, loan officers reported leaving lending standards for businesses and most commercial real estate unchanged while also seeing weaker demand for business loans.

“Banks reportedly tightened their lending standards on credit card and auto loans, while demand remained unchanged for credit cards and weakened for auto loans,” the Fed said.

Banks previously reported keeping loan standards mostly unchanged for many business loans while tightening commercial real estate loans in the third quarter. The Fed surveyed loan officers at 74 domestic banks and 22 U.S. branches and agencies of foreign banks.

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