FREE MEMBERSHIP Includes » ABL Advisor eNews + iData Blasts | JOIN NOW ABLAdvisor Gray ABLAdvisor Blue
 
Skip Navigation LinksHome / News / Read News

Print

Overall Lender Confidence Positive in Q1, But Down from End of 2022

June 27, 2023, 07:45 AM

Combined (bank and non-bank) business lenders’ confidence stayed slightly positive during the first quarter of 2023, at 50.3 points, yet that was a 5.8-point decline from the last quarter of 2022, according to the Asset-Based Lending Index released by the Secured Finance Network.

But when lender sentiment was divided into bank and non-bank segments, expectations diverged. Banks’ combined lender confidence dipped to 42.6 points in the first quarter, falling below the 50-point level – which distinguishes improving from declining confidence – for the first time in three full years; that may have reflected the bank failures that occurred earlier this year and the resulting imperative for banks to emphasize credit value instead of growth opportunities. Non-banks, however, made a small gain and stayed above the 50-point threshold. The bank and non-bank expectations for new business demand and client utilization paralleled the overall confidence findings, as non-banks were bullish while banks were bearish.

“We’re seeing the first evidence of a shift from bank to non-bank lending in the secured finance space related to the business cycle,” said SFNet CEO Richard Gumbrecht. “This is normal and underscores the resilience of our industry as an essential provider of capital in both a growing and receding economy.”

While the combined lender expectations for overall business conditions and portfolio performance were lower (more so for banks than non-banks), compared to the previous quarter, lenders also expressed the most confidence for gains in new business, hiring, and client utilization. Even though lenders had slightly lower first-quarter expectations for those three categories than for the previous quarter (though non-banks were more hopeful about hiring than banks), they nevertheless anticipated improvements in all three areas.

The report contained modestly positive news about committed credit lines in all categories during the first quarter of 2023. Total committed credit lines were up 2.1 percent for lenders who responded in all four quarters of 2022 and this year’s first quarter, and up 10.5 percent among these lenders, year-over-year, compared to the first quarter of 2022. New credit commitments for lenders reporting across all five quarters were up 3.6 percent in the first quarter of this year vs. the last quarter of 2022, while new commitments among these lenders shot up 34.4 percent, year-over-year, compared to the first quarter of 2022.

Banks themselves showed little movement in total commitments and outstanding loans between the fourth quarter 2022 and the first quarter 2023, growing just 1.8 percent and 1.4 percent, respectively. New commitments, though, were up 3.2 percent and commitment runoff was off by 27.7 percent – performances that gave a big boost to net commitments. Non-banks didn’t show much movement in total commitments and outstandings, either, with the former up by 2.5 percent and the latter inching up by 0.5 percent. (Hence, it may take another quarter or longer to see new business demand perk up.) While new commitments plummeted by 37.2 percent in the first quarter, they’re still high; meanwhile, commitments runoff skyrocketed, by 55.9 percent, in the quarter. The upshot is that net commitments are still positive, but down sharply from the last quarter.

The data for the first quarter of 2023 was mixed on combined credit line utilizations. Among lenders reporting across all five quarters, credit line utilization stayed largely flat after dropping for two consecutive quarters, which kept it slightly under its pre-pandemic levels. Nevertheless, credit line utilization grew by 2 basis points from the last quarter of 2022, and by 17 basis points, year-over-year, compared to the first quarter of 2022.

The minimal overall movement largely reflected how the banks and non-banks performed. The bank respondents’ credit line utilization rate crept up to just 40.1 percent – below its most recent peak of 42.9 percent from the second quarter of last year – while the rate for non-banks was down 1 percent in the quarter, from 53.8 percent to 52.8 percent.

Where combined portfolio performance was concerned, a smaller percentage of lenders reported taking on more non-accruing loans as a percentage of total loans outstanding in the first quarter of 2023 than was the case in the final quarter of last year. Conversely, a greater percentage of lenders reported that they had fewer such loans in the first quarter than the percentage reporting fewer loans in the fourth quarter of 2023. Specifically, 13.3 percent of lenders reported an increase in such loans in the first quarter, vs. 28.6 percent of lenders who reported having more of these loans in the last quarter of 2022. And, 43.3 percent of lenders reported a decrease in non-accruing loans in the first quarter of 2023, while just 28.6 percent of lenders had fewer such loans in the previous quarter.

However, non-accruing loans as a percentage of total loans outstanding were up by 18 basis points from the fourth quarter of last year to the first quarter of 2023, and up 28 basis points compared to the first quarter of last year.

The banks themselves saw a slight deterioration in portfolio performance, as criticized and classified loans and non-accruals increased both in absolute terms and as a share of outstandings. Non-banks’ performance stayed strong, as most of them reported declining or flat write-offs.

Finally, the percentage of lenders reporting a quarter-on-quarter decrease in gross write-offs remained the same in the fourth quarter of 2022 and the first quarter of 2023, at 16.7 percent. But a lesser percentage of respondents (4.2 percent) reported an increase in gross write-offs in the first quarter than in the fourth quarter of 2022 (16.7 percent). Meanwhile, 79.2 percent of reporting lenders had no change in gross write-offs in the first quarter, vs. 66.7 percent in the last quarter of 2022 that reported no change.

For the banks themselves, gross write-offs as a share of outstandings went down in the first quarter. All the non-banks reported declining or flat write-offs, too.





Week's News



Comments From Our Members

You must be an ABL Advisor member to post comments. Login or Join Now.