UPDATE:Treasury July Survey:Loan Balances Down 1% At 22 TARP Lenders

Outstanding loan balances at 22 U.S. banks receiving federal assistance fell by 1% in July from June, according to a survey issued Tuesday by the U.S. Treasury Department.

Total origination of new loans fell by 10% at the 22 surveyed lenders, the survey also showed. Of the 22 lenders in the survey, total loan originations declined at 19 in July; just three saw them increase.

The Treasury Department attributed the declines to decreased demand from borrowers, payment of outstanding debt and charge-offs by banks. Its survey is the eighth monthly report tracking lending activities by banks getting federal assistance under the Troubled Asset Relief Program, or TARP.

On mortgage loans, the report showed mixed results, with an 8% increase in lending for new home purchases offset by an 18% decline in refinancings, a drop the Treasury Department attributed to declining home values and a weak job market. The total outstanding balance of mortgage loans at banks covered by the survey fell 2%.

Demand for commercial and industrial loans and for loans for commercial real estate were "well below normal levels," the survey also found. The Treasury Department pointed to a lack of new commercial construction and the fact that banks are trying to reduce their exposure to commercial real-estate loans, where delinquencies are expected to mount. Outstanding credit-card balances at the surveyed lenders fell by 1% in July, showing consumers are spending conservatively and paying down existing debt, according to the Treasury Department.

Small business lending was another soft spot, as the survey found a 1% decline in outstanding loan balances to small business, and a 14% drop in loan originations to such firms. Since many small business loans are included as commercial and industrial loans, or commercial real estate loans, the trend is in line with declines in those areas, the Treasury Department said.

Firms covered by the survey include Bank of America Corp. (BAC), Capital One Financial Corp. (COF), Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), KeyCorp. (KEY), Morgan Stanley (MS) and Wells Fargo & Co. (WFC).

- By Judith Burns, Dow Jones Newswires, 202-862-6692; [e-mail]