Lending experiences biggest increase in seven years

Lending rose nearly twice as fast in 2014 as it has in any year since the financial crisis. The jump was the biggest in seven years. In the fourth quarter alone, loan balances at U.S. banks rose by $151.7 billion. That was nearly as much as lending grew in all of 2010 and 2011 combined. For 2014, lending rose $416 billion, compared to just $197 billion in 2013.

The data is preliminary and compiled by research service BankRegData. The Federal Deposit Insurance Corp. will release the official numbers in a few weeks.

All that lending made 2014 a good year to be a bank. Profits in the fourth quarter for all banks was $40.4 billion. That was the biggest three-month profit for all U.S. banks in at least 23 years. That jump took place despite the fact that interest rates are low, pushing down the profitability of banks, and that the largest banks in the nation largely had a disappointing fourth quarter. Profits appear to be rising at small and mid-size banks.

Banks have been lending more aggressively to businesses for a while. Business loans rose $42 billion in the fourth quarter, the most of any category. But credit card lending was not far behind, rising $35 billion. Mortgage lending is still pretty tepid, up just $6 billion, or 0.3%. Auto lending, which regulators have said may be getting too loose, was up $6 billion as well, or 1.6%.

But while banks have become more aggressive on lending in other places, they are remaining conservative. Banks socked away an additional $60 billion in the quarter in U.S. Treasuries. Bank holdings of U.S. government debt has increased dramatically in the past year or so, particularly at the big banks. In all, banks now hold $405 billion in U.S. Treasuries, up from $160 billion a little more than a year ago. A good portion of the increase likely has to do with new regulations that push banks away from riskier assets. Cash also rose by $19 billion in the quarter.