Syndicated loans continue to show increase in quality, Shared National Credit review finds

By Sara Rosenberg

New York, Sept. 15 - Quality of syndicated bank credits showed continued improvement this year and most industries exhibit much improved credit quality from peak problem levels experienced only a few years ago, according to the Shared National Credit review released by federal bank and thrift regulators.

In aggregate, the 2005 review covered 6,817 credits totaling $1.6 trillion in credit commitments to 4,579 borrowers.

Total commitments were up by 5.3% from the prior year, the first increase since 2001, but 21% below the 2001 peak of $2 trillion.

The review found that total classified credit commitments, which are those rated as either substandard, doubtful or loss, fell by $21.5 billion, or 29%, from the previous year, compared with a net decrease of $78.2 billion, or 51%, the year before.

Commitments rated special mention decreased by $7 billion, or 21%, in contrast to 2004 when they fell by $22.4 billion, or 41%.

The ratio of classified credit commitments to total commitments fell to 3.2%, the lowest level since 1999.

The increase in 2005 total commitments is a result of higher customer demand and increased competition among a variety of lenders to provide new funds.

In addition, the review found that the quality of syndicated credits improved in most industries, with the strongest improvement found in oil, gas, pipelines and utilities.

The results were reported by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.

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