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WSJ: Banks Aren't Feeling a 'Trump Bump' in Loan Growth

WSJ: Banks Aren't Feeling a 'Trump Bump' in Loan Growth

By    |   Tuesday, 10 October 2017 03:50 PM

President Donald Trump’s election victory on a pro-business platform led bankers and investors to forecast that companies would be more willing to borrow money to finance growth. And that was supposed to lift bank profits.

That hasn’t happened, with loan growth slowing to 2.1 percent from 8.1 percent last November, according to Federal Reserve data cited by The Wall Street Journal. Bigger companies are more likely to turn to the bond market for inexpensive financing of dividends and stock buybacks.

BB&T Corp. chief executive Kelly King last year said there was “a huge pent-up demand” from commercial clients that wanted money to invest in their businesses. “They’re driving trucks with 250,000, 300,000 miles,” he said.

Instead of seeing greater certainty about promised changes to healthcare and the tax system, company executives have seen little legislative action as the Republican majority in both houses of Congress hasn’t delivered. Otherwise, the economy is growing steadily and unemployment is low, even if wage growth has stagnated.

Other analysts say the slowing loan growth may be a return to normal levels after a surge in the wake of the 2008 financial crisis. The Fed cut interest rates to record lows for a prolonged period, giving companies time to refinance and issue new debt.

Investors this week will be scrutinizing loan growth among large banks that report third-quarter earnings this week, starting on Thursday with J.P. Morgan Chase and Citigroup.

Corporations are also sitting on $2.3 trillion of cash, giving them financial firepower for investments, acquisitions, share buybacks and dividends, Fed data showed in September.

That’s up nearly 60 percent since the recession ended in mid-2009.

The Financial Select Sector SPDR Fund, an exchange-traded fund that holds banks, is up about 13 percent year-to-date, compared with 14 percent for the S&P 500 stock index.

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President Donald Trump's election victory was supposed to boost loan growth. That hasn't happened as much as investors and bankers had expected.
bank, lending, finance, donald trump
Tuesday, 10 October 2017 03:50 PM
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