Federal Deposit Insurance Corporation, Federal Reserve Board and Office of the Comptroller of the Currency report moderate syndicated-loan credit risk as non-pass share rises to 9.1%

The Federal Deposit Insurance Corporation, Federal Reserve Board and Office of the Comptroller of the Currency published the 2024 Shared National Credit (SNC) Program Report, concluding that credit risk in large, syndicated bank loans remains moderate, while warning that credit quality trends have weakened under higher interest rates for leveraged borrowers and compressed operating margins in some sectors. The report also flags that the magnitude and direction of risk in 2025 will depend on borrowers’ ability to manage interest expenses, real estate conditions and broader macroeconomic factors. The review covered SNC loans originated on or before June 30, 2024 and examined leveraged loans and stressed borrowers across industry sectors, focusing on shared commitments of USD 100 million or more across multiple regulated financial institutions. The SNC portfolio comprised 6,699 borrowers and USD 6.5 trillion in commitments, up 1.8% year over year; the share of “non-pass” commitments (special mention and classified) rose to 9.1% from 8.9%. U.S. banks held 45% of total SNC commitments but 23% of non-pass loans; leveraged loans represented nearly half of commitments and 79% of non-pass loans.