Redux PPP disabled for a smooth, but slow start; banks suffer from low demand for credit

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Slow and steady

“The relaunched paycheck protection program is a smoother and slower start than last spring, when desperate borrowers flooded banks with loan applications and overwhelmed government information systems. The program opened wide on Tuesday as the Small Business Administration began accepting applications from all lenders. “

So far, “the agency has approved around 60,000 applications from nearly 3,000 lenders. These requests totaled $ 5 billion, consuming about 2% of the $ 284 billion the program can lend. These figures do not include loan requests sent to the agency on Tuesday, the first day most lenders were allowed to send loan requests. “

“The program is open to both first-time borrowers and some returning: The hardest hit small businesses, those whose sales have fallen by at least 25% since the pandemic took hold, are eligible for a second loan. Lenders have said they are bracing for significant demand, especially for second-round loans. “

The average loan size “was less than $ 20,000 for first-time borrowers and less than $ 75,000 for second-time borrowers, a sign that loans were approved for small businessesThe Wall Street Journal said.

the Wall Street newspaper

Low demand

“Things can get better for banks, but without applying for loans, income growth will always be difficult to achieve, specifies the Journal. “One of the reasons for the optimism, widely cited by all banks, is the amount of liquidity that banks can still transfer into their securities portfolios. Even in the absence of a pick-up in demand for loans, banks can continue to invest the cash generated by deposits in fixed income securities that generate more yield. There is certainly hope in the shape of the yield curve. Banks at all levels have noted the recent steepening of the curve, as long-term rates have risen, as a big plus. “

“But even a steeper curve isn’t as useful as it could be unless the banks add more loans. And loan growth remains a wait-and-see prospect. A bigger stimulus may or may not help matters, especially for consumers, who have used a large chunk of their payments to pay off debts. Without some improvement in the underlying lending conditions, banks are no longer a real bargain. “

Financial Time

Tight feeding

In the euro area, meanwhile, the problem is not so much weak demand as limited supply. Banks there “cut lending to businesses and households late last year as a resurgence of coronavirus cases in the single currency bloc prompted further closures which fueled fears of an increase bad debts, according to a survey by the European Central Bank. In the last quarter of 2020, banks tightened their lending guidelines and approval criteria for new business loans the most since the 2008 financial crisis, and several expected to further restrict access to the bank. credit in the first quarter of this year, the ECB’s quarterly survey of banks found.

“Banks have also tightened their lending criteria for mortgages and consumer credit. The tightening was primarily driven by banks’ heightened perception of risk, reflecting uncertainty surrounding the economic recovery and concerns about borrower creditworthiness amid new coronavirus restrictions, ”the ECB said.

Lowering the boom

Goldman Sachs CEO David Solomon, ”says the boom in blank check company listings on Wall Street is unsustainable, casting doubt on a financing tool used to raise nearly $ 79 billion from investors last year. Speaking to analysts as Goldman announced a doubling of its fourth quarter earnings, Solomon said he didn’t expect special purpose acquisition companies, or Spacs, to continue to sell out. register at their current pace and raised questions as to whether the show had “gone too far.”

“Although I think these activity levels continue to be very robust and continue as we approach 2021… I don’t think this is sustainable in the medium term,” he said declared.

Solomon also revealed that Goldman’s fledgling banking business should not show a profit until 2022, a year later than expected, reported American Banker.

Somewhere else

Change over time

HSBC plans to close 82 branches in Britain this year “after a drop in footfall to its retail network and an increase in digital banking services,” Reuters reported. “The lender said it will have 511 branches in the UK after the closures, many of which will be refurbished and some provide fewer services.”

“HSBC said it has started testing different branch formats and decided to provide fewer full-service branches in major cities while others focus on providing cash and self-service technologies. The bank said “pop-up” mobile branches will also be rolled out this year, adding that the downward trend in branch usage predates the pandemic. “

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