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Banks are still on the defensive when it comes to lending, due to high interest rates but middle-market commercial and industrial lending is one area that local banks are looking to for growth this year.
That’s the take from experts at a 2024 outlook seminar organized by MassEcon, the state’s public-private, nonprofit economic development group.
During Wednesday’s virtual presentation Michael Tyler, the chief investment officer of Eastern Bank Wealth Management, said that banks are still pulling back from lending after last year’s spring banking crisis but are looking to get some growth from C&I lending.
“Middle market commercial [and industrial] is a good area to lend in right now. Companies are growing, the economy is still growing – more slowly, yes, but still growing. And so commercial and industrial loans, they’re looking pretty good,” Tyler said.
He said business loans are more attractive to bankers as they can “tie that to cash deposits” compared to others focused on lending. He noted that bankers may look to make loans in industries where there is good cash flow. In previous reports, local banks tended to lean toward the warehousing of e-commerce companies, as well as medical field-related banking and lending.
Tyler said real estate lending remains tough overall, with a tight supply in residential real estate, and a challenging commercial real estate office sector in the downtown Boston area.
“I would say downtown office space, particularly downtown Boston, is the toughest space because many corporate tenants are consolidating down into less space, people work from home, they don’t need as much space, and so on. When you get out into the suburbs, office space is looking pretty good. These people are still going into their suburban offices,” he said. “When you think about labs, or education or warehousing or industrial or manufacturing, real estate in many other areas is doing fine.”
He added that the economy may be going on a soft landing scenario as the Federal Reserve signaled three rate cuts for this year, which can produce a “slowed” economy, but “still growing.”
