by Calculated Risk on 10/20/2010 07:03:00 PM

Just a little color ... this sounds like a sluggish recovery with little new investment. The following comments from Comerica and Wells Fargo on Commercial & Industrial (C&I) lending this morning are mixed. Perhaps a little improvement, but not much. Here are the excerpts from the transcripts (ht Brian).

From Comerica Incorporated conference call:

Analyst: Can you talk about what you saw from your more traditional borrowers during the quarter? Any signs of lines being drawn down or increased optimism?

Dale Green, EVP, Comerica: Yeah, this is Dale. Number one, as we indicated, the usage was up a bit from about 45% to about 46%, it’s good to see that. We haven’t seen that in a while. If you look at the backlogs and you look at the growth from new customers, and increases to existing customers, it’s kind of spread across most of our businesses. Currently the dealer business is showing growth. The energy business has indicated they are showing growth, those backlogs continue to look good, and what we call the commitments to commit, or the approved deals that we’re waiting to close are up rather substantially this quarter over last quarter, and again, that’s generally across most of the segments. Middle market, technology and life sciences, and so forth. So the quality of the backlog, if you will, is good in the sense that there are more deals that have been approved that are waiting to close, and the level of activity is generally a little better than it’s been. So I would say that we are cautiously optimistic, but you know, this is an uncertain time. So while we’re seeing some improvements, and we’re happy to see it, we’re happy to see better usage, there’s still an economy here that most business people will tell you is concerning, troubling, uncertain.
...
Analyst: I know you talked about utilization rate and everything in terms of demand firming up on commercial lending, but just trying to get an idea of how soon we can see growth commercial offset so CRE roll off in terms of loan growth.

Dale Greene: I hope soon, but the reality is that number one, in terms of new CRE types of opportunities, there are very few new opportunities, so we’ll continue to see the run off of the commercial real estate book as part of a design, if you will. Clearly, as we talked about before, is I had one against growth. While we are seeing some positive trends in the non-CRE, the rest of the C & I book – it’s still very difficult to predict, because there’s just that uncertainty, and so I wouldn’t sit here and tell you exactly when you might see it. It might be a while. I mean, John talked about unemployment rates, and the growth and the economy still being on very muted labels. I don’t know that that’s going to change anytime in the near term, therefore, what we’re doing is the things we’ve done for years. We’re calling on customers, we’re calling on prospects, we’re looking for the core middle market opportunities, particularly in Texas and California. We have loads of good opportunities, we have a better quality backlog, but it will take some time, I think, to see any significant growth, if you will, in the C & I book. It’s just going to be sort of ongoing, quarter to quarter, a block and a tackle kind of an effort.

Ralph Babb, CEO: As Dale was mentioning, we’re staying very close to our customers, and what we’re hearing from our customers, and we have a lot of customers who are doing very well. They are not, because of the uncertainty in the economy, and other things that affect their particular business, investing for the future. They’re really taking care of what’s happening today, and until there is a confidence factor build out there along with the economy showing a steady improvement, I don’t think you’re going to see loans consistently pick up in the industry. You monitor the numbers, I’m sure, just like we do, as to how the industry in total is working. We saw a little bit of that in Q1 and Q2, where things began to pick up, and then all of a sudden the economy slowed back down again, and the estimates that I’ve heard and look at, over the next couple of quarters and into next year, are not significant in pickup. I hope that that’s not correct.

And from Wells Fargo:

Analyst: So what is the percentage of the C&I loan utilization? I will use that as a measure for how much loan demand there is. What is your feeling about loan demand?

WFC CFO: Roughly in the low 30s on commercial line utilization, and that has been relatively consistent for a couple of quarters now. Again as we say, we are seeing somewhat increased activity, but it is not as robust as we would like to see it be. As I said we think we are picking up market share because we have got so many relationships and all the other cross-sell. So we'll just have to see when demand comes back.

WFC CEO: One of the keys, is our increase in commitments is much greater than what is happening in the portfolio, the outstandings. So we are making investments today, spending money today, to win new clients, service existing clients, that we're not seeing the benefit of yet.