# BHC Loan Growth¶

## Definition¶

The natural logarithm of a bank's total loans in the current quarter, divided by its total loans in the previous quarter.2 Here the total loans are measures by BHCK2122 in FR Y-9C reports. This item represents the proportion of a bank's total loans that do not exclude the allowance for loans and lease losses.

\text{LoanGrowth}_{i,t} = \ln \left( \frac{\text{BHCK2122}_{i,t}}{\text{BHCK2122}_{i,t-1}} \right)

where BHCK2122 is from the Bank Holding Company data by the Federal Reserve Bank of Chicago.1

Warning

A caveat is that if $\text{BHCK2122}_{i,t}$ is 0, then this measure would be invalid as $\ln(0)$ is undefined. In this case, I replace it with -1 which means the total loans is reduced by 100% to 0.

An alternative measure of loan growth, the percentage change in the total loans, is not affected by this issue.

\text{LoanGrowthPct}_{i,t} = \left( \frac{\text{BHCK2122}_{i,t}}{\text{BHCK2122}_{i,t-1}} -1\right) \times 100

Their correlation is over 99%.

## Equivalent Stata Code¶

 1 2 3 4 5 use "~/frds/result/BankHoldingCompany LoanGrowth.dta", clear gen qtr = qofd(RSSD9999) format qtr %tq xtset RSSD9001 qtr, quarterly gen BHCLoanGrowthPct = (BHCK2122 / L.BHCK2122 - 1) * 100 

## Reference¶

1. This definition is from Zheng (2020 JBF)

Last update: August 10, 2020