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AI spending boosts demand for commercial loans at regional banks
The Federal Reserve’s senior loan officer survey showed net 16.1% of banks reported higher demand for large and midsize company loans in the second quarter, up from 4.8% previously.
Yahoo Finance reports that regional banks are seeing momentum as AI-related capital spending spreads from major Wall Street lenders to manufacturers, equipment suppliers, and other large and midsize borrowers that rely on regional institutions for commercial and industrial credit.
Demand for commercial and industrial loans strengthened in the second quarter, with the Federal Reserve senior loan officer survey showing a net 16.1% of banks reported higher demand from large and midsize companies, up from 4.8% in the prior quarter. Bank loan officers cited higher investment in plants and equipment, along with greater financing needs for inventories.
Activity has also been supported by a pickup in US manufacturing. Yahoo Finance notes that the July ISM manufacturing index showed US manufacturing activity at a four-year high, marking the seventh straight month of expansion after three years of contraction, and some respondents pointed to tailwinds from AI infrastructure build-out.
Regional bank investors have taken notice, with the State Street SPDR S&P Regional Banking ETF, KRE, trading near a record high earlier this week and up 17% since the start of the year, outperforming major stock indexes. Yahoo Finance also highlights comments from PNC CEO Bill Demchak about broad-based commercial loan growth and from Fifth Third Bancorp CEO Tim Spence about avoiding data center construction financing while lending to construction services and heavy machinery manufacturers that benefit from AI and defense spending.