Commercial Lending
The biggest banks reported a significant drop in commercial loans, after borrowing spiked in the first quarter. The trend is both a good sign for the economy, as companies feel confident enough to repay backup lending facilities they tapped at the start of the lockdowns, and a potential drag on banks’ revenue growth.

JPMorgan, Citigroup Inc. and Bank of America Corp. all saw commercial loans on their books drop by at least 10% from the first quarter’s level.

Citigroup saw “significant” loan payments as companies turned to capital markets for cash, Chief Financial Officer Mark Mason said. At U.S. Bancorp, about 40% of clients paying down loans were issuing bonds, but the remaining 60% were utilizing profits to reduce debt, CFO Terry Dolan said in an interview.

Bank of America saw commercial loan utilization rates at “historically low levels,” but is optimistic that loan demand could pick up in the next few quarters as the economy recovers, CFO Paul Donofrio said. JPMorgan’s CFO Jennifer Piepszak expressed a more guarded outlook.

“We will probably tread water at these levels,” she said. “Increasing CEO confidence with M&A activity and capital investment should be supportive of more normalized loan growth, but that may take some time.”

Branch Plans
The largest banks are using 2020 to further their expansion plans, while regional banks are closing more branches.

JPMorgan said it got approval to enter 10 additional states, which would bring the bank’s branch presence to 48 states. The bank has almost 120 branches in its expansion markets and will open more than another 150, Piepszak said. Bank of America has also been pushing to grow market share, opening 13 branches in new markets during the quarter, Chief Executive Officer Brian Moynihan said.

Regional banks, meanwhile, are speeding up plans to shrink their branch networks. U.S. Bank had announced last year that it would close 10% to 15% of its branches by early 2021, but it told analysts this week that it now plans to close around 25% as customers shift preferences toward digital services.

Among the additional branches U.S. Bank will be closing, most were shut during pandemic-related lockdowns, Dolan said in a phone interview. The bank will be using savings from branch closures to remodel existing locations and open some new storefronts, Dolan said.

U.S. Bank’s acceleration parallels that of PNC Financial Services Group Inc., which told investors last month that it will close 160 branches this year, twice the number it had originally intended.