SFNet Reports ABL Market Confidence Positive in Q1/22 Despite Fluctuating Economy

According to data released by the Secured Finance Network in its quarterly asset-based lending index and SFNet confidence index, confidence in the asset-based lending market was positive in Q1/22, but banks and other lenders are watchful of a fluctuating economy.

“Though the U.S. economy is showing deteriorating signals, the asset-based lending industry is healthy and has proven to be resilient to economic challenges so far,” Richard D. Gumbrecht, CEO of SFNet, said.

The most positive expectations among lenders were centered on demand for new financing, client utilization and hiring. But lenders indicated declining expectations in overall business conditions and portfolio performance.

Survey Highlights

For banks, asset-based loan commitments (total committed credit lines) were up 2.3% in Q1/22 compared with Q4/21. Outstandings (total asset-based loans outstanding) increased by 13.5% based on 38 survey respondents’ data, representing $100 billion. According to the survey report, this is a return to pre-COVID-19 pandemic levels.

Non-bank trends were largely parallel, the survey analysis revealed. Commitments inched up 1.6%, but the change in outstandings was up 10.5%. In terms of credit-line utilization rates for both bank and non-bank lenders, there was an increase for the fifth consecutive quarter. The Q1/22 utilization rate for banks was 40.8%, up from 36% the previous quarter. The rate was higher for non-bank lenders at 57.6% compared to 50.8% the prior quarter.

Portfolio performance remained an area of strength for both banks and non-banks, according to the asset-based lending index. Banks again reported three-year lows for criticized and classified loans and non-accruing loans. Gross write-offs also declined for banks. Non-banks also showed strong performance in their portfolios, as 90% reported a decrease in or consistent level of non-accruals.

“It’s not all gloom for the U.S. economy. The labor market remains a bright spot, with strong job growth and the unemployment rate holding at 3.6%,” SFNet’s report said. “Manufacturing also has proven resilient to high energy prices and surging input costs, with capacity utilization at its highest point in more than decade. And, importantly, consumer spending remains strong, sustained in part by left-over fiscal support measures from 2021.”

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