The Great Consumer Lending Stall: Restarting the Engine
Although consumers, the press and society at large have been critical of banks for pushing too much easy credit and causing heavy indebtedness and seemingly insurmountable delinquencies, ironically it is now the lack of credit that has come under censure. For banks it’s a real Catch-22. Unprecedented credit tightening is the norm as banks rush to stem losses while increasing provisions and shoring up capital. Unfortunately, given the economic situation they have not been able to offset the loss picture with growing earning assets and therefore revenue. There is a recognition that lending flows need to increase to stimulate revenue but difficult to justify that growth when more and more consumers are falling behind on their obligations.
In this Strategic Commentary entitled “The Great Consumer Lending Stall: Restarting the Engine,” Speer & Associates, Inc. (S&A) focuses in-depth on the current state of consumer lending and the continued difficulties being faced by the banking sector. Both from a macro-economic perspective and the standpoint of industry profitability, banks must return to lending to individuals – mortgages, home equity loans, personal loans, auto loans, and credit cards. The heyday of fast profits and easy credit may be over, but a new equilibrium must be established.
