Confidence and business activity have climbed since the election. The economy seems to be muddling along. This would typically be good for banks, as demand for loans should be higher.
And since banks earn most of their revenue from interest paid on loans, it would explain the steep rise in bank stocks. However, bank lending has fallen significantly since last year.
Total bank loans have grown just 4.6% since February 2016, the weakest showing since 2014. Business loans rose 3.9%—the slowest growth rate in nearly six years—and were the worst-performing segment.
The main reason for the tepid economic growth over the last eight years has been a lack of business investment. Many thought improved consumer confidence and business activity were signs that this trend had reversed.
So far, it appears the opposite has happened.
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