Index of banking activity rebounds after five months of decline

Index of Banking Activity rebounds after five months of decline

Date: June 24, 2020

The Index of Banking Activity Composite Index rose to 54.9 in November, in a slight increase from its October reading of 54.6. The rise marked the first increase in the rate of banking-industry expansion in five months.

The Composite Index had been declining since May, when it registered a reading of 59.2. Index readings above 50 indicate market expansion; those below 50 denote contraction; the greater the amount above 50, the greater the pace of expansion; and the further below 50, the greater the rate of contraction.The renewed market strength came amid signal changes in several of the 16 component indexes that contribute to the Composite Index. The indexes that track changes in consumer-loan application volume and consumer-loan approvals both rose to 50.0, indicating a shift from contraction toward expansion. The index that tracks consumer loan pricing, meanwhile, approached 50 from the opposite direction, indicating its rate of expansion has cooled to a level that barely registers: That consumer-loan pricing index fell to 50.8 from 52.2 in October. The commercial-loan pricing index, which began contracting in October, slowed slightly, falling to 49.3, from 49.8 in October. Source: American Banker and VantageScore Solutions, LLCCompiled from surveys of executives at hundreds of financial institutions across the United States, the index is an industry bellwether that tracks 16 distinct business indicators, such as volume of deposits, loan applications and loan delinquencies, and how they change month over month. Measurements of each of these components are combined into a single Composite Index, in which readings above 50 indicate business expansion, and those below 50 signify contraction. Find more information about the Index and its component measurements at AmericanBanker.com.

The Composite Index had been declining since May, when it registered a reading of 59.2. Index readings above 50 indicate market expansion and those below 50 denote contraction; the greater the amount above 50, the greater the pace of expansion and the further below 50, the greater the rate of contraction.

The renewed market strength came amid signal changes in several of the 16 component indexes that contribute to the Composite Index. The indexes that track changes in consumer-loan application volume and consumer-loan approvals both rose to 50.0, indicating a shift from contraction toward expansion. The index that tracks consumer loan pricing, meanwhile, approached 50 from the opposite direction, indicating its rate of expansion has cooled to a level that barely registers: That consumer-loan pricing index fell to 50.8 from 52.2 in October. The commercial-loan pricing index, which began contracting in October, slowed slightly, falling to 49.3, from 49.8 in October.

Source: American Banker and VantageScore Solutions, LLC

Compiled from surveys of executives at hundreds of financial institutions across the United States, the index is an industry bellwether that tracks 16 distinct business indicators, such as volume of deposits, loan applications and loan delinquencies, and how they change month over month. Measurements of each of these components are combined into a single Composite Index, in which readings above 50 indicate business expansion, and those below 50 signify contraction. Find more information about the Index and its component measurements at AmericanBanker.com.