The credit risk associated with large, syndicated bank loans remains moderate, according to the recently released 2024 Shared National Credit (SNC) report.
The 2024 SNC portfolio included 6,699 borrowers totaling $6.5 trillion in commitments.
The SNC Program assesses risk in the largest and most complex credit facilities shared by regulated financial institutions and nonbank investors. The minimum aggregate loan commitment threshold is $100 million. SNC reviews are completed every first and third quarter. Large agent banks are reviewed twice annually while other agent banks are reviewed less frequently. Reports include outstanding loans and commitments.
When the findings are compared to the 2023 report, commitments rose 1.8 percent, and the percentage of loans that deserve management’s close attention increased to 9.1 percent. Loans needing special attention were “non-pass” loans rated “special mention” and “classified.”
U.S. banks hold 45 percent of all SNC commitments but only 23 percent of non-pass loans. Nearly half of SNC commitments are leveraged with leveraged loans comprising 79 percent of non-pass loans.
Compressed operating margins in some industry sectors and the pressure of higher interest rates on leveraged borrowers are causing continued weakened credit quality trends.
This year, borrowers’ ability to manage interest expenses, real estate conditions, and other macroeconomic factors will likely impact the magnitude and direction of risk.