Commercial loan delinquency trends
Commercial loan delinquency trends in the United States are finally moving in the right direction. According to the Chicago Business Daily, delinquency rates are slowly but steadily shrinking – a sure sign of recovery from the crash of 2008. “With rising incomes and property values, more landlords are able to cover debt payments and refinance maturing loans, things many struggled to do after the crash of 2008.” Every sector of commercial banking feels optimistic about 2015. A study published by the Federal Reserve Bank of St. Lois clearly shows national delinquency rates at a 30 year low, and steadily declining.
Delinquency trends have a predictable pattern: climbing up before a recession, peaking at the height of nationwide insolvency, and steadily declining as the economy recovers. Banks have weathered these waves by watching global financial trends.
While this seems like good news for US bankers in 2015, our neighbors to the north are not faring as well. One source reports Canada’s small to medium-sized business delinquency rates are on the rise due to unstable oil revenues. A spike in energy costs at the end of 2014 led to a 2.2% increase in “moderate” commercial loan delinquencies.
Another factor is the collapse of Target Canada shutting down hundreds of Ontario locations last January. Small business who relied on Target Canada were left in limbo, orders unfulfilled, forced to absorb the losses. According to Bill Phelan, president of PayNet, The Canadian Business Lending Index is in a downward trend. “…this is a real correction going on, it’s not just a head fake,” he said. “There’s going to be more pain before growth, but we don’t see this signaling a recession.”
US Bankers are still keeping a close eye on the Canadian market, despite optimism. While our delinquency trends seem to be in a steady decline, Canada’s commercial loan instability could easily cross the border. Contact us to get the latest news in loan delinquency trends at home and abroad.
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