Banks Expect to Lend More in 2013

The outlook for conduit lending activity is improving, and with good reason. CMBS issuance in January hit its highest monthly level since December 2007, supported by increasingly stable corporate and real estate bond markets. The need for credit in support of pending refinancings is concentrated in segments of the market that are not well served by stalwart life companies or the largest banks. Whether to meet these demands or to facilitate new transaction activity, the current revival of securitization is none too soon in coming. 

As CMBS volume rises, there are indications that credit quality is coming under pressure. Property economics are mixed, but the supply of credit is picking up while interest rates still linger at historically low levels. Only a minority of market participants believes that systemic distortions from monetary policy may now be doing more long-term harm than good in commercial lending markets. I count myself among this group, but readily acknowledge that the weight of policy opinion is against me.