US regional banks don’t expect large loan losses from energy exposure

US regional banks with large energy loan portfolios continue to see some credit deterioration, but, in a recent report, Standard & Poor’s Ratings Services says it thinks meaningful loan losses are likely delayed.

"We believe banks' conservative advance rates, borrowers' hedging activities, and previously strong debt issuance, which many borrowers used to repay bank debt, have helped delay significant credit deterioration in banks' energy loan portfolios thus far in 2015," said Standard & Poor's credit analyst Robert Hansen. "We haven't seen any material deterioration in loan performance thus far among commercial borrowers or within real estate portfolios in local energy-focused markets, but we could see some deterioration next year.

"We could lower our ratings on regional banks, or assign more negative outlooks to bank ratings, depending on loan performance, concentrations, and energy prices," Hansen said.

 

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