The Federal Reserve’s July Senior Loan Officer Opinion Survey showed more demand for consumer credit and mortgages, analysts said. That’s a good sign, JPMorgan said, but the survey didn’t account for recent concerns about an escalating trade war, which may hit borrowing.

The KBW Bank Index has fallen 7% so far in August, as 10-year yields tumbled on growth and trade fears. The stock gauge reached its lowest levels since early June. Top decliners over the past four sessions include Comerica Inc., SVB Financial Group, KeyCorp and Huntington Bancshares Inc.

Banks were underperforming the rebound in stocks Tuesday, as markets calmed after China acted to stabilize its currency, and as analysts downplayed the repercussions of the U.S. labeling China a currency manipulator. Though there were still concerns about a trade war escalation, Citi kept its S&P 500 targets steady, and Goldman Sachs now sees three Federal Reserve interest rate cuts.

Here’s a sample of the latest commentary on the Fed’s loan officer survey:

JPMorgan, Daniel Silver

JPMorgan views the Fed’s survey as a “positive for the economy,” with the latest figures contributing to a drop in its estimates of recession risk. However, Silver wrote in a note that the survey “reflects the period over the three months through July, so it may not be especially relevant for market participants gauging how the recent news on trade policy will impact the economy.”

He highlighted “solid increases in demand shown across all of the reported types of mortgages following a run of over a year in which demand generally had been declining.” That “supports the idea that the drop in mortgage rates since late last year is generating a meaningful increase in demand for housing.” He added that “demand for consumer-related loans also picked up during the past quarter, although the latest readings don’t look especially strong.”

Wedbush, Peter Winter

The survey showed “demand for residential mortgage skyrocketed,” as lower rates fed into the biggest sequential increase since 2003, Winter wrote. He added that bank executives, coming out of second-quarter earnings, had “maintained a positive loan outlook as pipelines were strong, business and consumer confidence was high, and economic outlook remains positive (albeit slowing).” Most regional banks saw 2% to 4% average loan growth in 2019, while mid-cap banks forecast mid-to-high single-digit growth, he said.

However, Winter warned that with “no end in sight for the trade wars with China, loan demand could be dampened pretty quickly.” That, along with continuing margin pressure, would put Wedbush’s already-lowered earnings estimates further at risk.

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