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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

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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. https://www.chicagofed.org/banking/financial-institution-reports/bhc-data. ↩

  2. This definition is from Zheng (2020 JBF). ↩

Last update: August 10, 2020

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