Regional Banks Gain as U.S. Business Lending Rebounds

U.S. regional banks rely heavily on net interest income and corporate relationships, making a revival in commercial lending an important gauge of business investment and bank earnings. The opportunity extends beyond credit: companies are consolidating operating deposits, payments and treasury management with core lenders, generating lower-cost funding and fee income. At KeyCorp, about 91% of commercial loans are to clients that also use the bank for deposits, payments or capital-markets services, illustrating how lenders are expanding their share of each corporate relationship.

Results released from July 15 through July 21 confirmed the trend. KeyCorp said period-end commercial-and-industrial loans climbed $2.1 billion, or 3%, while commercial-payments fees posted double-digit annual growth. Regions reported average loans of $98.7 billion, up 2%, and average deposits of $130.7 billion. PNC said loans at June 30 rose $7 billion from March to $368 billion; average Corporate & Institutional Banking deposits fell 2% seasonally but were 8% higher year on year, while nonperforming loans declined 10%.