Credit quality associated with large, syndicated bank loans remains moderate, federal banking agencies said Friday in the 2023 Shared National Credit report. At the same time, the agencies pointed to increased risk in credit quality trends due to the pressure of higher interest rates on leveraged borrowers and compressed operating margins in some industry sectors.
The SNC Program assesses risk in the largest and most complex credit facilities shared by regulated banks and nonbank investors. It is governed by the Federal Reserve, FDIC and OCC. The 2023 portfolio included 6,589 borrowers, totaling $6.4 trillion in commitments, an increase of 8.7% from a year ago, the agencies said. The percentage of loans that deserve management’s close attention—”non-pass” loans comprised of SNC commitments rated “special mention” and “classified”—increased from 7% of total commitments to 8.9% year over year.
While U.S. banks hold 46% of all SNC commitments, they hold only 20% of non-pass loans, according to the report. Nearly half of total SNC commitments are leveraged, and leveraged loans comprise 86% of non-pass loans.
