Increase Liquidity Via Loan Sales
First Name,
It's been a chaotic month in banking with the failures of Silicon Valley Bank and Signature Bank. These events sent shockwaves throughout the financial markets, resulting in unprecedented volatility in bank stocks, bank runs, and massive federal intervention. While most of our bank clients have seen minimal changes to their deposits, it has caused many to think about ways to improve their liquidity.
As banks look at their assets, selling current or future troubled loans can be an excellent strategy, especially since NPAs are likely to increase dramatically. If you’re going to sell assets to increase liquidity, why not sell the assets that are current or future headaches?
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Loans and Leases, 30-89 Days Past Due
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Noncurrent Loans and Leases
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Restructured Loans and Leases
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As you can see above, returning NPAs to “normal” levels of say 2014 would result in a 200% increase. Moreover, many banks do not have adequate staffing to handle even a modest increase in NPAs. While we don’t think we will return to 2008 levels, an increase in NPAs is the base case.
The good news is the secondary market has remained strong for loans, especially for non-performing, sub-performing or performing loans currently or likely to be in workout. The days of aggressive banks, credit unions, or debt funds paying off loans in workout are likely over as credit tightens throughout the industry.
Clark Street Capital specializes in selling loan portfolios across all asset classes for banks and non-bank lenders. We’re writing today to gauge any interest that your institution may have in cleaning up your balance sheet. If interested, Clark Street Capital can provide a free loan portfolio evaluation. To get started, please fill out this survey:
Free Portfolio Evaluation
Prudent financial institutions are evaluating the impact of higher rates and a slowing economy on their loan portfolios. Recently, we have seen an uptick in interest from clients who want Clark Street Capital to review their portfolios.
The experts at Clark Street Capital are willing to perform a free and confidential evaluation of a loan portfolio with some reasonable conditions such as a minimum portfolio size, the opportunity to present our findings to senior management, and an exclusivity on loan sales for the portfolio.
Our deep dive includes:
- A thorough evaluation of every significant relationship (commercial only)
- Secondary market pricing based on our proprietary approach
- Recommendations as to which assets to include in a possible loan sale
- Feedback on how to strengthen the credit for either a sale or a hold
To get started, we would need the following:
- An executed NDA (we will generally sign any commercially reasonable NDA)
- A data tape
- Access to the loan files, especially recent appraisals, financial statements, rent rolls, and credit memos
If you have any interest in discussing further, please send us an email or fill out this survey.
GFC 2.0 Webinar
This past week, we hosted a webinar to discuss what has been going on in the banking world. Topics included:
- The aftermath of the failures of Silicon Valley Bank & Signature Bank
- The safety and soundness of the regional banks
- Asset & Liability Management
- The state of asset quality in banks
- How liquidity and Fed decisions will affect M&A in 2023
- Are we entering a Recession?
- Will the Fed Pivot?
- Does the Bank Term Funding Program Make Sense for my Bank?
We are attaching a PDF of the slides shared in the presentation which can be found here.
Additionally, the recording of the presentation can be found here.
Please reach out with any questions or comments.
Best,
Jon Winick
Chief Executive Officer
Clark Street Capital
601 S. LaSalle St., Suite 504
Chicago, IL 60605
P: (312) 662-1501
C: (312) 545-6484
