Phoenix Management, a part of J.S. Held's "Lending Climate in America" survey results reveal concern for the second half of 2024, despite expected interest rate declines and customer's expansion plans.
JERICHO, N.Y., Jan. 18, 2024 /PRNewswire-PRWeb/ -- Phoenix Management, a part of J.S. Held, has released the results of their Q4 2023 "Lending Climate in America" survey, which asked lenders how the credit ratings in their portfolios have changed from Q3 to Q4. A high majority of lenders (83%) signified a decline in credit ratings, consisting of 67%/17% split between a slight decline and a more-than-slight decline. The other 17% have seen no material changes in the credit ratings of their portfolios during Q4.
When asked when they believe the Federal Reserve will begin to cut interest rates, all the surveyed lenders believe this decrease will begin at some point in 2024. However, 42% of the lenders believe this will occur in the first half of 2024, while the other 58% believe the rate cutting will not begin until the second half of 2024.
Additionally, Phoenix's "Lending Climate in America" survey asked lenders to identify which macroeconomic headwind is most concerning heading into 2024. Of the lenders surveyed, thirty-three percent indicated the looming debt crisis is the most concerning, while 25% identified a U.S. recession as most concerning. Policy (interest rate) risk and election/political uncertainty each garnered 17% of the responses. The remaining 8% identified geopolitical risk/war as the most concerning macroeconomic headwind.
Lender optimism in the U.S. economy remained the same in the near term at 1.75 in both Q3 and Q4 2023. 75% of lenders believe the economy will perform at a "C" level during the next six months while 25% believe the economy will perform at a "D" level. More telling, lender expectations for the U.S. economy's performance in the longer term decreased significantly from 2.50 to 2.08. Of the lenders surveyed, only 25% believe the U.S. economy will perform at a "B" level during the next twelve months, half the percentage from the prior quarter.
"Lenders significantly reduced their longer-term expectations for the U.S. economy despite 100% unanimity on interest rate declines in 2024 and meaningfully higher expectations of their customer for hiring, raising additional capital, and making capital improvements and acquisitions" says Michael Jacoby, Senior Managing Director of Phoenix Management. "Lenders expressed concern regarding the looming debt crisis and a potential recession, and perhaps most telling, the Diffusion Index for Commercial Lending (where a score of zero represents an expectation for stable lending over the next six months) declined to -83%, which is the lowest score ever recorded. Lenders are clearly concerned with the economy. They expect increases in loan losses, bankruptcies, and unemployment. Eighty percent of respondents indicated credit ratings have declined in their portfolios, and as a result, we expect to see a tightening of loan structures, more attention to portfolio management, and earlier identification of potential problem loans."
To see the full results of Phoenix's "Lending Climate in America" Survey, please visit https://www.phoenixmanagement.com/lending-survey/
About Phoenix Management, a part of J.S. Held
For 36 years, Phoenix has provided smarter, operationally focused solutions for middle market companies in transition.
Phoenix Management Services® provides turnaround, crisis and interim management, and specialized advisory for both distressed and growth-oriented companies. Phoenix Investor Services® provides quality of earnings, operational diligence, Quality of Enterprise®, business integration, sell-side business preparation, and other transaction related support. Phoenix IB® provides seamless investment banking solutions including M&A advisory, complex restructurings and capital placements.
As a part of J.S. Held, Phoenix works alongside more than 1500 professionals globally and assists clients – corporations, insurers, law firms, governments, and institutional investors.
J.S. Held is a global consulting firm providing technical, scientific, financial, and strategic expertise across all assets and value at risk. Our professionals serve as trusted advisors to organizations facing high-stakes events demanding urgent attention, staunch integrity, clear-cut analysis, and an understanding of both tangible and intangible assets. The firm provides a comprehensive suite of services, products, and data that enable clients to navigate complex, contentious, and often catastrophic situations.
J.S. Held, its affiliates and subsidiaries are not certified public accounting firm(s) and do not provide audit, attest, or any other public accounting services. J.S. Held, its affiliates and subsidiaries are not law firms and do not provide legal advice. Securities offered through PM Securities, LLC, d/b/a Phoenix IB, a part of J.S. Held, member FINRA/ SIPC or Ocean Tomo Investment Group, LLC, a part of J.S. Held, member FINRA/ SIPC. All rights reserved.
Media Contact
Kristi Stathis, J.S. Held, +1 786 833 4864, [email protected], https://www.jsheld.com/
SOURCE J.S. Held
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