Report: Credit quality improved in SNC program in 2022

Credit quality improved in 2022 in the Shared National Credit portfolio—a bundle of large, syndicated bank loans that includes 6,214 borrowers and totals $6.1 trillion—although the results do not fully reflect increasing interest rates and softening economic conditions that began to affect borrowers in the second half of last year, federal agencies said today in a report of the portfolio.

The report concluded that credit risks for syndicated loans—large loans originated by multiple banks—were moderate at the end of the review period, the agencies said. While risks to borrowers affected by COVID-19 have declined, they remained high for leveraged loans, as well as the entertainment, recreation and transportation services industries.

The percentage of loans that deserve management’s close attention decreased from 10.6% of total commitments to 7% year over year, according to the report. Nearly half of total SNC commitments are leveraged loans, and commitments to borrowers in industries affected by COVID represent about one-fifth of total SNC commitments. For leveraged borrowers that also operate in COVID- affected industries, non-pass loans decreased to 18.9%, but remain above the 13.5% observed in 2019. While U.S. banks hold nearly 45% of all SNC commitments, they hold only 21% of non-pass loans.