Credit risk associated with large, syndicated bank loans remains moderate, but weakened credit quality trends continue due to higher interest rates and compressed operating margins in some industry sectors, three banking agencies said today in their most recent Shared National Credit Program report released today.
The SNC Program assesses risk in the largest and most complex credit facilities shared by regulated financial institutions and nonbank investors. The review by the FDIC, Federal Reserve and Office of the Comptroller of the Currency reflects the examination of SNC loans originated on or before June 30, 2024. The new report found U.S. and foreign banks continue to own the largest share of SNC commitments, while nonbanks hold the largest share of special mention and classified loans.
The magnitude and direction of risk in 2025 is likely to be affected by borrowers’ ability to manage interest expense, real estate conditions and other macroeconomic factors, the report concluded. “These elements will continue to impact the financial performance and repayment capacity of borrowers in a wide variety of industries, especially highly leveraged borrowers that may lack the financial flexibility to respond to external challenges.”
