US banks loan approvals keep dropping

Mon, 27 Jul 2009 08:26:08 GMT



A new survey shows American banks cutting down on lending, as concerns over the health of the country's economy remain.

The study conducted by The Wall Street Journal found that the total loans held by 15 large US banks plunged by 2.8 percent in the second three months of the year.

Financial giants such as J.P. Morgan Chase, Bank of America and Citigroup as well as regional banks such as Fifth Third Bancorp, based in Cincinnati, and Regions Financial Corp. of Birmingham, Alabama are among the banks surveyed by the newspaper.

Analysts say it's because bankers and borrowers refuse to take risks in an uncertain economy.

There has been an increase in the volume of loans in April and May.

But a large part of it has come from re-financing mortgages and re-newing business credits -- not from new loans.

Some 47 percent of federally insured deposits belong to the banks.

The 15 banks also benefited 182.5 billion dollars in taxpayer-funded capital infusions through the Troubled Asset Relief Program.

According to the report, the loan range of Bank of America decreased by 3.6 percent to 942.2 billion dollars in the second quarter.

The plunge shows higher loan losses and lower loan demand as borrowers pay off outstanding debts, said a spokesman with the bank.

"There were fewer opportunities to make high-quality loans because of the recession," he said.

DB/SC/DT

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