Some lenders are poring over commercial portfolios more frequently than normal — perhaps as often as once a month — to uncover problems hidden by payment deferrals and government stimulus before it's too late.
Hospitality sector credits are coming out of forbearance just as coronavirus cases surge. Restructurings and charge-offs could mount unless vaccine distribution happens quickly enough to jump-start travel by mid-2021.
The Federal Housing Administration said in its annual actuarial report that the capital reserve ratio on its mutual mortgage insurance fund increased to 6.10% in fiscal year 2020, up from 4.84% a year earlier.
Lenders pushed back against the notion that city dwellers' pandemic-driven flight to suburbia would hurt them. They say fewer landlords have sought deferrals as vacancy rates remain low and rent collections have stabilized.
The subprime lender cited low odds that Washington will deliver further economic relief, and the fact that $1.5 billion of loans whose deferral period expired are now more than 30 days behind.
The company's Silicon Valley Bank unit reduced its loan-loss cushion by $52 million. Private-equity and VC clients have warmed to the practice of doing deals virtually, which increases lending opportunities, SVB executives said.
Banks have managed to steer around trouble spots in energy, hotel and mall-related credits. But fears of further deterioration, an eviction wave or more job losses are keeping lenders circumspect.
The performance of about $3 billion in hotel and other loans flagged by the Dallas company as high-risk has been a "a pleasant surprise," its chief credit officer said at an industry conference.
The Federal Reserve could ease capital rules, foster the creation of special-purpose banks and take other steps to strengthen minority communities and businesses without legislation being sought in Congress — if it has the will to do so, experts say.
The COVID-19 pandemic has teed up a growth opportunity for the buy now, pay later (BNPL) financial industry, as recession worries made people receptive to entering short-term payment plans that can fit in a budget.