This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Banks Want to Lend, but No One Wants to Borrow

Stocks in this article: JPM BAC C WFC

NEW YORK ( TheStreet) -- With over $1.5 trillion in free reserves parked with the Federal Reserve, critics have taken issue with the big banks for being gun shy about making loans in the aftermath of the crisis and hoarding cash.

But banks' anemic lending activity in recent quarters has more to do with weak demand for loans than tight credit standards or a reluctance to lend, according to industry analysts.

The large banks are certainly well -capitalized to make loans. Bank of America's (BAC) loan-to-deposit ratio has dropped to 96% as of March 31, from 109% in March 2007. Over the same period, Wells Fargo's (WFC)ratio of loans to deposits dropped to 94% from 115%. Citigroup (C) and JPMorgan Chase (JPM) might be the worst performers on this regard with their loan to deposit ratios at 77% and 73% respectively.

With that kind of dry powder, banks are under tremendous pressure to increase their lending from regulators that have been urging them to make more loans to shareholders demanding to see revenue growth.

The Fed also continues to maintain an easy money policy that allows banks to borrow at near-zero rates and lend at higher rates, making lending particularly profitable.

But uncertainty about the economy and the uneven recovery in jobs has made consumers and small businesses even with good credit history nervous about borrowing. And for those with underwater mortgages and massive debt, the process of deleveraging is not yet complete.

"I don't believe it when politicians talk about how banks aren't lending and that we are hoarding cash, " said Frank Sorrentino, CEO of North Jersey Community Bank. "Banks don't make money unless they lend. It is not natural for them not to lend. But the number of qualified borrowers has shrunk dramatically. Borrowers out there are not looking for more debt. There is no expansion, no hiring. There is a lack of demand for loans."

Recent data does seem to suggest a greater willingness on part of banks to ease credit terms and make more loans.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs