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Fed says banks eased standards for business loans

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At least before the latest market turmoil, banks were making it a little easier for businesses to get non-real estate loans, according to the Federal Reserve.

Reporting Monday on a survey taken in July, the Fed said small businesses were less likely than larger ones to be enjoying the easier credit, but there was some benefit for them as well.

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About 20% of the 55 domestic banks surveyed said they had eased standards on commercial and industrial loans for large and middle-market firms.

But only 10% reported an easing of loan terms for smaller firms.

The trends were reported in a survey of senior loan officers at banks across the country, which the Fed conducts once a quarter.

The latest survey was taken before the currrent waves of concern about the European debt crisis and the downgrade of the U.S. debt rating by Standard & Poor’s -- developments some analysts say could result in a new tightening of credit.

Demand for commercial and industrial loans was up modestly at larger businesses, the Fed said.

But on average, it added, there was ‘close to zero’ increase in demand from smaller firms.

There also was not much change on the real estate or consumer lending fronts, although the Fed reported a modest increase in demand for credit cards and auto loans.

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Many banks in the western United States have been doing more commercial and industrial lending, RBC Capital Markets analyst Joe Morford said in a report Monday.

Morford upgraded his rating on Cathay General Bancorp to ‘outperform,’ in part because of the prospect of more trade lending at the Chinese American bank.

However, Morford noted, overall growth on Cathay’s loan portfolio will be slow because, like so many community and regional banks, it’s still shedding soured commercial real estate loans made during the boom.

Cathay shares were up $1.09, or 9.5%, at $12.51, in afternoon trading in New York.

-- E. Scott Reckard

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