NEW YORK, NY--(Marketwire - Nov 14, 2012) - The American Banker Index of Banking Activity (IBA) registered a reading of 55.4 for the month of September as credit quality improved and lenders cited more favorable business conditions within their markets. The index improved from its previous level of 54.0.
The results for September, the latest month for which information is available, represents the highest reading yet for the index, which debuted in June at a reading of 54.4.
The IBA is a product of American Banker's regular surveys of banking executives and is published in partnership with VantageScore Solutions. The latest installment of the index was derived from 235 responses to surveys conducted in October.
The IBA tracks the level of business activity across a range of factors that are fundamentally important to the commercial banking business. Composite readings above 50 indicate an expansion of activity and readings below 50 point to contraction. The farther from 50 a reading is, the stronger the indicated change. The IBA composite number has been above 50 in each of the four months that it has been tabulated.
BANKING INDUSTRY CONDITIONS
A decline in loan delinquencies was one of the notable features of the IBA. Consumer delinquencies declined to 37 from 41.5 in August while commercial loan delinquencies logged a reading of 33, a significant improvement from the 40 reported in August.
Other IBA lending components were also upbeat. The reading for consumer loan rejections came in at 45 in September, after reaching 50.7 in August, marking the most positive reading for this indicator during the life of the index.
Bankers cited increased optimism about the conditions in their markets during September, with a reading of 55 for that component, compared with 54 in August. Lenders' views of real estate conditions climbed to 61.4, vs. 56 the previous month.
A trouble spot for bankers during September was loan pricing, which backtracked in an environment marked by artificially low interest rates and intense competition for creditworthy applicants. The reading for consumer loan pricing hit 41.7 in September, down from an already weak 43 the previous month. Commercial loan prices registered a reading of 37 in September, a decline from 38.7 a month earlier.
WHAT RESPONDENTS ARE SAYING
In addition to the quantitative elements of the survey that support the IBA, open-ended questions are posed to respondents seeking information on the factors they believe are having the biggest immediate impact on their businesses.
As in previous months, lenders surveyed in September noted the uncertainty hanging over their markets because of the presidential election. However, on the positive side, they cited new electronic applications for mobile devices, record low interest rates and growing stability in real estate as factors helping to attract new business.
HOW THE INDEX WORKS
The Index of Banking activity is a diffusion index made up of 11 equally weighted sub-indicators that summarize various business activities, such as loan activity (e.g. applications, approvals, delinquencies and loans outstanding), loan pricing, deposit account activity, staffing, and business and real estate conditions.
Respondents are asked whether each sub-indicator increased, decreased or had no change from the previous month. Responses do not include opinions, intentions or expectations, although bankers were given the opportunity to comment about market conditions.
FUTURE INDEX READINGS
Monthly readings of American Banker's Index of Banking Activity will be presented as a time series that can be used to monitor the prevailing rate and direction of change in banking business cycles and eventually to benchmark whether an institution is operating in line with overall industry needs.
About American Banker Research
American Banker Research is a unit of American Banker, the flagship information brand of the diversified B-to-B media company SourceMedia. American Banker Research brings a full range of professional research capabilities to companies and executives in banking and payments. The unit manages the American Banker Executive Forum, a community of senior banking and payments executives who are committed to regularly sharing opinions and insights with the editorial and research groups at American Banker. Members include qualified professionals who read American Banker and its sister brands Bank Technology News and PaymentsSource, and attend their professional conferences. These include C-level executives and other senior professionals employed at commercial and community banks, bank holding companies and other financial companies across all asset classes.
SourceMedia, an Investcorp company, is a business to business media and marketing solutions company serving the financial industry and the related fields of professional services and technology. SourceMedia offers its clients and subscribers professional information services, industry-standard research, data applications, in-depth seminars and conferences, and specialized marketing services.
About VantageScore Solutions
Stamford, Conn.-based VantageScore Solutions, LLC (www.vantagescore.com) is an independently managed company that holds the intellectual property rights to the VantageScore model, a generic credit-scoring model introduced in March 2006. Created by America's three major credit reporting companies (CRCs) -- Equifax, Experian and TransUnion -- VantageScore's highly predictive model uses an innovative, patented and patent-pending scoring methodology to provide lenders and consumers with more consistent credit scores across all three major credit reporting companies and the ability to score more people.