ZERO HEDGE writes:
Last quarter, amid the bank panic resulting from surging loan loss provisions, we observed that the heart of the debt-addicted US economy was hit especially hard by the double whammy of collapsing consumer loan supply, with the August Senior Loan Officer Survey finding that banks reporting tighter loan conditions had surged to the highest level since the Lehman bankruptcy, while consumer demand for most loan types had tumbled, in some cases to record low levels.
However, in the subsequent three months much has changed, following the latest round of bank earnings which saw a collapse in loan loss provisions across the US banking sector, which miraculously plunged from near all time highs back to pre-covid levels in the span of just a few weeks.
This dramatic turnaround in bank outlooks on future loan losses also had a profound impact on loan issuance standards.
According to the latest Federal Reserve Senior Loan Officer Opinion Survey (SLOOS) for bank lending activity over the third quarter of this year which was released last week, lending standards generally eased across most loan categories, thawing what until Q2 was an effectively frozen loan market.
Specifically, the Q3 SLOOS found that lending standards for commercial and industrial (C&I) loans again tightened in 2020 Q3, but improved from the devastation observed in Q2. 38% of banks on net tightened lending standards for large and medium-market firms, which was a nearly 50% improvement from the 71% in the previous quarter, while 31% of banks on net tightened lending standards for small firms vs. 70% on net in the previous quarter.
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