Banking asset indicators: What they tell you and what they don’t (Part 9 of 14)
Family first mortgages remain the biggest
Family first mortgages remained the largest loan type at the end of 2014. Total family first mortgages stood at $1,766 billion. However, this loan type has seen poor growth in recent times. Family first retail loans grew by a meager 0.33% in 4Q14 compared to 4Q13. This growth rate is much lower than the average sector growth rate. This is bad news for banks that focus on this loan type like Wells Fargo (WFC) and US Bank (USB). These banks are focusing on other loan types to make up for the loss in growth.
Commercial and industrial loan growth picked up
The fall in growth of family first loans has been offset by growth in commercial and industrial loans. This loan type is as big as family first mortgages. Total commercial and industrial loans stood at $1,715 billion. However, unlike family first mortgages, the growth rate of commercial and industrial loans has been good. The growth rate for this loan type was 2.53% in 4Q14 compared to 4Q13. This was evident in the way banks went after this loan type.
Banks such as JP Morgan (JPM) and Bank of America (BAC) aggressively pursued the commercial and industrial segment. Both these banks are part of the Financial Select Sector SPDR (XLF). The two banks account for 13.21% of XLF’s portfolio.
Farm loans and card loans grow the fastest
Farm loans were the fastest growing loan type, increasing by 6.35% in 4Q14 compared to in 4Q13. This loan segment is however small in terms of size. Farm loans stood at $77.6 billion. Card loans also grew at a healthy 5.19%. Capital One, JP Morgan, and Citibank were the biggest beneficiaries of growth in card loans.
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