JPMorgan ‘open for enterprise’ in leveraged loans as rivals get caught with losses

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Jan 13 (Reuters) – JPMorgan Chief Monetary Officer Jeremy Barnum informed traders the financial institution is “completely open for enterprise” in leveraged lending whilst different U.S. banks are anticipated to ebook important losses on dangerous loans underwritten final 12 months.

“Phrases are higher, pricing is best, we’ve got the sources wanted,” Barnum stated on a convention name with analysts. “We’re absolutely there. No overhang and no situation.”

Barnum’s feedback come after many U.S. banks in the reduction of on lending to lower-quality company debtors final 12 months, as Wall Avenue’s demand for leveraged loans plunged because the Federal Reserve raised rates of interest to tame inflation.

After important losses on debt gross sales final 12 months, together with a $700 million loss on an $8.5 billion debt bundle funding the buyout of software program maker Citrix Programs Inc, main banks have largely chosen since then to soak up debt that they had underwritten earlier within the 12 months.

Some $35 billion to $50 billion of such loans are caught on banks’ books as they await a greater market atmosphere, bankers informed Reuters beforehand.

Final summer time, Financial institution of America collectively led a gaggle of banks to offer $13 billion in loans and bonds to Elon Musk for his acquisition of social media large Twitter. The banks have since struggled to get the debt off their books at an affordable worth, as an alternative selecting to carry the debt.

When requested whether or not these caught offers would constrain lending exercise by giant banks like JPMorgan, which has been much less energetic than its friends, Barnum stated the overhang is already mirrored in costs and banks are in a position to soak up losses on present offers.

“There’s a little bit of a story that exercise out there wants to beat an overhang,” Barnum stated. “We’re not satisfied that that’s true.”

Banks should nonetheless mark to market the Twitter debt and different offers to their market worth on their books, setting apart funds for losses which might be reported in quarterly outcomes. The precise quantity stays to be seen, because the banks resolve how a lot to put in writing it down based mostly on market checks and judgment.

Financial institution of America Corp’s (BAC.N) Chief Monetary Officer Alastair Borthwick stated firm accounts for leveraged loans in its outcomes, with out giving particulars on any giant offers.

“We mark our positions each week,” and books earnings or losses by way of its funding banking and buying and selling arms, Borthwick stated. “It’s all in there, our outcomes mirror any marks in any given quarter and we observe the method as we do each time.”

Reporting by Matt Tracy; enhancing by Lananh Nguyen

Our Requirements: The Thomson Reuters Belief Rules.



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