WASHINGTON — Banks continued to ease lending standards over the first quarter due in part to increased competition and a less uncertain economic outlook, a Federal Reserve Board survey found Monday.

That was especially the case for commercial and industrial loans by large and middle-market firms, lenders said, which have seen increased signs of demand, according to the Fed's April Senior Loan Officer Opinion Survey.

Six large banks reported that they "eased somewhat" credit standards for approving C&I loans at firms with annual sales of $50 million or more in the January-March period. The majority of banks — 84% — said standards remained basically unchanged.

A similar trend appeared to be the case for smaller firms with a total of 7 out of 52 banks, or 13.5%, reporting credit standards had "eased somewhat." Additionally, about 33% lenders also reported "moderately stronger" demand for C&I loans by large and middle-market firms.

Banks also reported a pick up in commercial mortgages, especially at larger banks, but still saw tepid demand for all types of residential mortgages.

Demand for auto loans strengthened over the three month-period ended March 31, while few inquired about credit card loans and other consumer loans.

There were also signs of improvements in overall credit quality of potential business borrowers. About 57% lenders reported credit quality "improved somewhat" at large and middle-market firms, while about 39% of banks said credit quality improved at smaller firms who applied for loans.

"Large domestic banks were more upbeat than their smaller and foreign counterparts regarding improvements in the overall credit quality of business loan applicants," the Fed's survey said.

When it came to CRE loans, most banks — 87% — reported no change in their standards with only a few large banks and foreign banks reporting somewhat of an easing. Still, the largest banks reported demand was robust for CRE loans — affording it the strongest reading since the mid-1990s.

In keeping with the previous two surveys, about 10% of banks said they tightened standards on nontraditional mortgages. The majority of respondents said standards remained basically unchanged.

Standards on prime closed-end residential mortgages and home equity lines stayed the same in the latest quarter. Demand also petered off during the period making it the third consecutive quarterly decline.

About 45% of respondents reported moderately weaker demand for prime residential mortgages


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