Big Banks Up Their Lending to Businesses

We may be on our way to clearing one hurdle on the path to economic recovery: We're seeing the first quarterly increase in commercial and industrial lending in two years, reports the Wall Street Journal, compliments of big banks like JPMorgan Chase and US Bancorp. Moody's Analytics estimates 0.2% fourth quarter growth over the third quarter, to $1.22 trillion, and predicts a 3% rise in lending for 2011. Commercial and industrial lending "is the last thing that turns in a business cycle," notes a chief economist at Moody's.

Business will likely use the loans to beef up their operations, which could snowball into new jobs, and increased borrowing and spending by those fresh employees. Though the amount of outstanding business loans is nowhere near historical levels, and lending activity isn't consistent between all banks and industries, analysts say the uptick is worth acknowledging. "As banks get healthier, they get more rational and reasonable about normal risk taking," says a JPMorgan exec. However, lending normally sees a bump at year-end as companies increase their inventories, notes a Goldman Sachs analyst, who says "the true acid test" will come in early 2011. (More banks stories.)