Commercial lending

Funding pressures moderated in recent months, but loan charge-offs climbed. With festering concerns about a vulnerable economy, the potential for elevated credits costs could loom large over the upcoming bank earnings season.

The BSBY interest rate benchmark was originally envisioned as a successor to the once-ubiquitous Libor rate. But it failed to gain much traction, and Bloomberg now plans to shut it down next year.

Since the end of the Small Business Administration's 2022 fiscal year, the average loan size in its flagship program has dropped more than six figures. The addition of three new nondepository lenders could further drive down this figure.

Washington Trust shares plunged after the Westerly, Rhode Island, company disclosed it booked an office deal in the third quarter, boosting the size of its portfolio while other lenders are pulling back.

The deal has a prefunding account with $12 million deposited at closing, and will use that amount to purchase additional collateral during its 90-day period after the deal closes.

Credit unions and banks are lending more to merchants based in the Western U.S., reflecting trends reported in the Umpqua Bank 2023 Business Barometer and running against broader economic pessimism.

Credit ratings were cut on the highest number of commercial mortgage-backed securities in "recent memory" last week, according to strategists at Bank of America Corp.

With a week left in its 2023 fiscal year, the Small Business Administration has already approved 12% more 7(a) loans than last year. Larger banks were among the biggest gainers as a result, according to the agency's latest data.

Commercial real estate loans are a growing area of concern for banks. But OceanFirst says its exposure to a troubled shared credit tied to a Manhattan office building isn't a sign of broader problems in its portfolio.

Despite an industrywide rough patch, EverBank still sees promise in the niche business line. The Jacksonville, Florida, company has hired a pair of prominent industry experts to lead a new division tasked with serving investment funds.

Tighter credit standards and lower demand for business loans could make it harder for the Fed to achieve the soft landing it's seeking. Still, bankers are cautiously optimistic, noting that some businesses are using their savings to invest at a time when borrowing costs are high.

Banking and credit union regulators encouraged compassionate treatment of customers in Hawaii communities hit by wildfires. They also vowed to grant expedited approvals of temporary banking facilities, be flexible in compliance matters and provide other support to financial institutions.

JPMorgan Chase, Wells Fargo and TD Auto Finance all see opportunities in providing financing to dealers for inventory, the purchase of competitors and the addition of infrastructure for electric vehicle sales. Two other banks recently said they're exiting the business, which could provide a further opening.

Moody's said higher funding costs, a potential decline in bank capital and growing risk in the commercial real-estate industry prompted many of the downgrades.

That's pushed secondary leveraged loan prices near highs not seen in months as investors flush with cash seek out supply, leading borrowers to stream into both loan and junk bond markets.

Much of the industry is slimming down, with some banks calling it quits on riskier sectors and selling loans they no longer want. The trend is particularly prominent at regional banks that are preparing to comply with new capital rules.

While credit unions are being cautious with this lending line, some see opportunities to grow their commercial books amid setbacks at big-name banks such as Wells Fargo.

The issue is secured by a revolving pool of term and line-of-credit small-business loans made to a diverse set of industries.

The company sold debt in three parts, according to a person familiar with the deal, including selling more of an existing bond due in 2053. The reopening of the 30-year bond yields 1.6 percentage point over Treasuries.

The amount of distressed assets rose 10% in the first three months of the year, according to a new report from MSCI Real Assets.