The U.S. banking industry, after suffering years of reduced assets, toxic debts and decaying public sentiment, is poised for a strong recovery, such that institutions can begin extending more loans to consumers and small businesses, according to a report published this week by the Federal Deposit Insurance Corporation.
Martin Gruenberg, acting chairman of the FDIC, said on Tuesday that he is optimistic about banks' resurgence in lending activity but added that they need to go further to provide the wider public with the financial resources to affect growth.
Bank loan balances climbed by 1.8 percent – or $130.1 billion – in the fourth quarter, compared to the previous one, the FDIC reported. While the surge was mild, Gruenberg maintained that the market is strong enough to support greater small business lending.
Jim Chessen, chief economist at the American Bankers Association, expressed similar confidence in an interview with Reuters.
"I'm pretty optimistic about loan growth," he told the source. "We expect loan growth, particularly on the business side, to be 6 or 7 percent for 2012."
Earlier this week, Thomson Reuters and PayNet reported a slight uptick in small business lending in January, enough to mark the 18th straight month of double-digit year-over-year growth.
The FDIC noted that the October-December period marked the third straight quarter in which bank loan balances increased. Reuters contributor Dave Clarke summed up the optimism behind recent news:
"The FDIC report is the latest in a slew of data that has led economists to lay aside concerns that the U.S. economy would slow abruptly at the start of this year," he wrote. "The jobless rate hit a three-year low last month, manufacturing has picked up, and even the housing sector is stirring."