FTI Consulting U.S. Lending Market Survey: Lenders Expect

WASHINGTON, Feb. 23. 2022 (GLOBE NEWSWIRE) — FTI Consulting, Inc. (NYSE: FCN) today released the findings of its 2022 US Loan Market Surveywhich provides an overview of the impact of COVID-19, inflation, and other economic trends on the U.S. lending industry, as well as expectations for leveraged credit market conditions this year.

Following the sharp decline in training activity in 2021, respondents to this year’s survey anticipate a modest increase in activity. Almost half of respondents (47%) expect slightly higher training activity in 2022, and 35% expect 2022 training levels to be approximately equal to 2021. Only 4% of respondents said defaults and drive activity will be significantly higher this year.

Respondents thought retail, hotels and accommodation, restaurants and restaurants, and real estate and REITs are the sectors most likely to struggle over the next 12 months. This reflects the ongoing impact of the COVID-19 pandemic on these industries as well as growing concerns about inflation.

Respondents’ sentiment and expectations regarding the COVID-19 pandemic and its economic impact have changed significantly over the past year. Last year, most loans in recovery were attributed to COVID-19, and most respondents expressed concerns about its lingering impact on unemployment and resuming a normal lifestyle.

“This year’s survey reported significantly fewer concerns about the impact of COVID on the recovery and financial markets, even as the Omicron variant peaked nationwide,” Sanjeev said. Khemlani, head of the senior lender advisory practice within the Corporate Finance & Restructuring segment at FTI Consulting. Notably, many other respondents said federal financial aid programs and Federal Reserve policies aimed at countering the economic effects of COVID were excessive. In retrospect, it appears that policies aimed at mitigating the economic blow of COVID have gone too far and are now contributing to accelerating inflation, full-risk mode in leveraged credit markets, as well as very low levels of default. and restructuring activity.

Key findings from the survey include:

  • Lenders expect sky-high inflation, but below current fill rate levels. Despite the Fed’s stated intentions to control inflation, 75% of respondents believe inflation will be between 3% and 6% this year. Only 21% expect inflation to top 6% for the year, compared to the CPI’s 7.5% rise reported in January.
  • The risk of a geopolitical event, which in 2021 was only the main concern for 17% of respondents, was the main concern for 24% of respondents in 2022. Another new concern was the tension of supply chains. This concern comes second only to inflation. The persistence of COVID-19 and its negative effects ranked last among respondents’ top concerns.
  • Only 26% of respondents said loans actively managed by their training groups were driven by the effects of COVID-19, unlike in 2021, where 52% of respondents cited the same cause.
  • 60% of respondents expect supply chain issues affecting the global economy to be resolved in the second half of 2022, while another third of respondents believe the issue will only be resolved in 2023 or later.
  • 75% of respondents said the Fed’s easy money policies in 2020-21 will continue to dampen defaults and restructuring activity for up to a year.
  • 81% of respondents said environmental, social and governance (“ESG”) considerations impacted their investment decisions or industry exposure, with 23% of respondents saying they had a substantial impact.

“Looking at the responses from 2022 alongside those from 2021, one can see what could be the start of a slow shift in underwriting expectations towards more conservative standards,” said Dave Katz, senior segment managing director. Corporate Finance & Restructuring at FTI Consulting. . “Only 14% of respondents expected looser standards this year, well under half the amount who expected the same the year before, while more than a quarter of respondents expected stricter lending standards, an increase of 70% over last year.”

Survey methodology
FTI Consulting surveyed more than 200 bank and non-bank lenders across the United States between January 20 and February 7, 2022. Respondents included practice group lenders, general managers, directors, vice presidents , executive directors and credit managers.

About FTI Consulting
FTI Consulting, Inc. is a global business consulting firm dedicated to helping organizations manage change, mitigate risk and resolve conflict: financial, legal, operational, policy and regulatory, reputational and transactional. With more than 6,600 employees in 29 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges and make the most of opportunities. The company generated $2.46 billion in revenue in fiscal year 2020. In some jurisdictions, FTI Consulting services are provided through separate legal entities that are separately capitalized and independently managed. For more information, visit www.fticonsulting.com and connect with us on Twitter (@FTIConsulting), Facebook and LinkedIn.

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