US Banks Elevated Development Lending in Q2 Even With Delinquencies Excessive

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US Banks Increased Construction Lending in Q2 Even With Delinquencies High

Despite a high number of arrears due to the coronavirus pandemic, banks in the United States continued to grant non-resident construction loans in the second quarter. According to current data from S&P Global Market Intelligence.

In the second quarter there were construction loans amounting to approximately 280.6 billion USD, which corresponds to an increase of 2.9 percent compared to the beginning of the year. Construction loans from banks made up 3.46 percent of total loans and leases.

Loans for home construction loans for non-residential buildings rose 4.2 percent to $ 300.35 billion in the second quarter, and home loans for single- and four-family homes fell 1.4 percent to $ 80.25 billion .

The big banks continued to distribute loans in the second quarter. Wells Fargo reported an increase in home loans while US Bancorp saw a decline. The two banks reported the highest amount of construction loans in the second quarter. Wells Fargo reported $ 20.09 billion and U.S. Bancorp reported $ 10.69 billion. The top 5 are rounded off by Truist Financial Corp with USD 9.9 billion, JP Morgan Case & Co. with USD 9.67 billion and M & T Bank Corp. with $ 9.66 billion in construction loans.

Bank OZK's total non-residential construction loans increased 18.5 percent to $ 5.03 billion and PacWest's home loans increased 68.3 percent to $ 410 million.

George Glreason II, chairman and CEO of bank OZK, said some competitors had scaled back in the face of the pandemic.

"They have built real estate in markets across the country for a long time," Gleason said on a July 24 earnings conference call. "So there is clearly a need for fewer of most product types than it was three or five years ago. So the cake has gotten smaller, and COVID-19 has certainly continued to shrink that cake."

The entire industry has not stopped granting construction loans. In the second quarter, construction loans totaling $ 380.61 billion were granted to the top 20 banks in the United States.

However, arrears on home and non-home loans continued to grow, with arrears of $ 2.78 billion for non-home loans and $ 850 million in arrears for home loans. Arrears were lower in the second quarter than in the first quarter, but higher overall than in the last three years. In 2017, defaulted home construction loans were around $ 2.5 billion and defaulted home loans in the second quarter were around $ 3 billion.

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