I track US Commercial Bank Assets about once per month. Over the past 3 years, most banks were hoarding cash (as we all now) and buying US Treasury bonds (borrowing from the Fed at ..75 and buying Treasuries at 2-4% was not a bad trade). Those two assets -cash and treasuries - were about the only two assets that were increasing in size on US banks over the past 3 years. Last summer, however, we started to see some of the traditional asset categories increase. Here are a few examples over the past 3yrs:
Bank Credit - $9.6tln today ->More lending - $9.6tln 08/09 - $8.8tln 10/11 Loans and Leases - $6.9tln today -> More lending - $7.4tln 08/09 - $6.5tln 10/11 Commercial and Industrial - $1.4tln today -> More lending - $1.6tln 08/09 - $1.2tln 10/11 Real Estate - $3.5tln today -> At least not shrinking - $3.9tln 08/09 - $3.5tln 10/11 Government Securities - $1.7tln today -> Still high - $1.1tln 08/09 - $1.6tln 10/11 Cash - $1.7tln today -> Still high but dropping - $.400tln 08/09 - $1.9tln 10/11 Conclusion: Commercial banks clearly need to put cash to work. They no longer have massive leverage through credit derivative instruments (CDO's etc) to drive profits. They need to start lending and I think this is the start of it. This expansion of US Bank Assets is the oil in the machine. I think this is a strong positive for corporate credit.
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