Farewell to weakness? Commercial loans in the United States are picking up, but the growth rate of commercial real estate loans is still below historical averages.

JPMorgan recently released a report on the U.S. banking industry, reviewing the H.8 loan data and interest rate updates. As of December 17th, the Federal Reserve's weekly H.8 data shows that the year-to-date (4QTD) average loan growth has been 1.4%, higher than the 10-year historical average of 1.1%, and consistent with the 1.3% growth recorded in the third quarter of 2025. Commercial and industrial (C&I) loans including non-deposit financial institutions (NDFI) have seen a year-to-date growth of 2.1% in the fourth quarter, higher than the historical trend of 0.7% for the same category including NDFIs. Commercial real estate (CRE) loans have seen a year-to-date growth of 0.7% in the fourth quarter, lower than the historical trend of 1.4% for the same period. Federal Reserve policy outlook: Federal funds futures show a 16% probability of a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meeting on January 28th. Looking further ahead, the meeting on June 17, 2026 shows a 34% probability of two rate cuts from the current target range of 3.50%-3.75%. Interest rate curve signals remain divergent: The 1-month Secured Overnight Financing Rate (SOFR) and the 5-year U.S. Treasury bond yield spread remain in the negative range at -0.05%, narrowing by 4 basis points over the month and expanding by 34 basis points over the past 90 days; meanwhile, the 2-year and 10-year U.S. Treasury bond yield spread remains in the positive range at +0.65%, narrowing by 1 basis point over the month and expanding by 14 basis points over the past 90 days. As of December 17th, the weekly H.8 data from the Federal Reserve once again confirms a year-to-date average loan growth of 1.4% in the fourth quarter, higher than the 10-year historical average of 1.1%, and consistent with the 1.3% growth in the third quarter of 2025. According to the H.8 data, the most significant category of loan growth in the fourth quarter so far is non-deposit financial institution loans (NDFI), which have seen a year-to-date growth of 5.6%, compared to 7.5% in the third quarter of 2025. Large bank NDFI loans saw a year-to-date growth of 5.2%, compared to 7.4% in the third quarter, while small bank NDFI loans saw a year-to-date growth of 8.2%, compared to 8.5% in the third quarter. Consumer loans have seen a year-to-date growth of 1.6% in the fourth quarter, compared to 0.9% in the third quarter of 2025, mainly driven by small banks with a growth rate of 2.4%, compared to 2.0% in the third quarter, while large banks saw a year-to-date growth of 1.4%, compared to 0.7% in the third quarter. Commercial and industrial loans excluding NDFIs have seen growth lower than consumer loans, holding steady at year-to-date growth rates slightly lower than the 10-year historical average of 0.1%, with a third quarter growth rate of -1.5% in 2025. Commercial and industrial loans excluding NDFIs have been driven by small banks with a year-to-date growth of 0.2% in the fourth quarter, compared to 0.2% in the third quarter of 2025, while large banks have seen a decline with a year-to-date decrease of 0.1% in the fourth quarter, compared to -2.3% in the third quarter. Commercial and industrial loans including NDFIs have seen a year-to-date growth of 2.1% in the fourth quarter, higher than the historical average of 0.7% for the same period, with large banks (year-to-date growth of 2.2%, compared to 1.6% in the third quarter) and small banks (year-to-date growth of 1.7%, compared to 1.6% in the third quarter) both contributing to the growth. Residential real estate loans have seen moderate growth in the fourth quarter so far, with a year-to-date growth of 0.6%, compared to 0.7% in the third quarter of 2025. Large banks saw a growth of 0.4% in residential real estate loans, compared to 0.2% in the third quarter, while small banks saw a growth of 1.0%, compared to 1.4% in the third quarter. Commercial real estate loans have seen positive growth, with a year-to-date growth of 0.8%, but lower than the 10-year historical average of 1.4%, with a third quarter growth rate of 0.4% in 2025. Small banks have seen a year-to-date growth of 0.8% in commercial real estate loans in the fourth quarter, compared to 0.6% in the previous quarter, while large banks saw a growth of 0.7%, compared to -0.2% in the third quarter. As of December 17th, end-of-period deposits (EOP) increased by $97 billion on a month-over-month basis, with a growth rate of 0.6%, reaching a total of $17.4 trillion. Large banks saw a deposit increase of $93 billion, with a growth rate of 0.8%, while small banks saw a deposit increase of $6 billion, with a growth rate of 0.1%. Additionally, total borrowings increased by $11 billion on a month-over-month basis, with a year-to-date growth rate of 0.9%, large bank borrowings increased by $13 billion, with a month-over-month growth rate of 1.2%, and small bank borrowings remained flat. According to the Federal Reserve H.4.1 report (as of December 17th), discount window borrowings increased by $531 million on a month-over-month basis. The Federal Reserve Primary Credit Program (i.e. discount window) balance increased by $531 million on a month-over-month basis, reaching $8.87 billion, with an average balance for the week of $8.85 billion.