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Total Loans at Banks Grew 7.6% in First Week of June


Jun. 17 2015, Updated 11:22 a.m. ET

Average 7.9% loan growth in 2015

According to the latest Federal Reserve data released on June 12, 2015, total loans at all US commercial banks increased by 7.6% YoY (year-over-year) in the week ending June 5, 2015. Total loans grew 7.7% YoY in the previous week. Healthy loan growth is vital to a bank’s income growth.

The weekly YoY growth rate average in 2015 to date is 7.9% and has been steadily increasing for a year. The weekly YoY growth rate average in the last quarter of 2014 was 6.9%.

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The three broad loan categories

The above graph shows the weekly YoY total loan growth at all US commercial banks. Total loans are generally made up of commercial and industrial loans, consumer loans, and real estate loans.

Commercial and industrial loans are loans to businesses. Consumer loans include card loans, student, auto, and other consumer loans. Real estate loans include residential mortgages, home equity loans, and commercial mortgages.

The big four banks as well as regional banks, including BB&T (BBT), Regions Financial (RF), KeyCorp (KEY), and SunTrust Bank (STI), offer all three types of loans.

Bank of America has the biggest loan portfolio. It’s followed by Wells Fargo. While Citigroup is strong in card and commercial loans, Wells Fargo’s strength lies in mortgage lending. Together with J.P. Morgan, these banks form ~27% of the Financial Select Sector SPDR Fund (XLF).

Importance of loan growth

Banks earn interest income on disbursed loans. The sum of the net interest income and non-interest revenue is a bank’s net operating income. Typically, interest income contributes more than 60% to a bank’s total operating income. As a result, loan growth plays a key role in a bank’s performance.

In this series, we’ll review the banking sector’s two primary indicators—loan and deposit growth. We’ll discuss how they affect performance in the banking sector.


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