Loan volume, including credit card lending, slid 11% over the 18 months through the end of last year, but the decline showed signs of tapering off toward the end of 2009.
The foundation for a resumption in portfolio growth? Not this quarter, according to preliminary data from the Federal Reserve.
Estimates based on information provided by a sample of institutions put commercial bank loans at a seasonally adjusted $6 trillion at March 17. If that level holds through the remaining two weeks in the month, the period would register an 8.6% annual rate of decline, a faster pace than three of the previous four quarters.
Data for the 25 largest banks by assets and for the rest of the industry showed a similar trajectory (see charts).
Meanwhile, assets, which were about flat or down in each of the four previous quarters, reversed trend as banks built up cash positions. (Securities portfolios had grown sharply in each of the four previous quarters, but have contracted so far this period, while cash holdings have jumped by a quarter. The shift might reflect moves out of long-term assets in preparation for higher interest rates.)
Deposits increased, continuing the trend that prevailed for most of last year.
The loan trends in the Fed data are in line with guidance provided by some major institutions in presentations this month.
U.S. Bancorp's chief executive, Richard Davis, said his company's portfolio would contract this quarter despite the absence of capital constraints facing some competitors, and even though the company would green-light close calls about the creditworthiness of borrowers.
"What a surprise at the end of a two-year recession, the people who need [credit] the most are probably the least qualified and least attractive," he said.
Bank of America Corp.'s CEO, Brian Moynihan, said his company does "not see a big demand on our balance sheet going forward."
On the corporate side, output has recovered somewhat, but internal cash resources have been extraordinarily high. According to an analysis by equity analysts at JPMorgan Chase & Co., cash represented 11% of corporate assets, excluding financial companies, in December, the highest level since 1955.
Moynihan said: "The draw rate for our commercial middle-market credit is as low as it's ever been. So people have a right to borrow, they just don't have anything to do with the money."