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1、Large Cap BanksLeveraged Loans - Further Probe: LBO Loans Share Up - Money Centers Small Players; Whos Leading?This report delves further into leveraged loans and unpeels a little more by looking at sponsored activity. We have also updated for recent market trends, which have shifted. Leveraged loan

2、s are comprised of sponsored (private equity) and non-sponsored loans; sponsored loans are divided into LBOs and other sponsored loans. Key takeaways: 1) LBO loan syndications have been growing faster since 2018, and their share total sponsored loan syndications hit a post-crisis high 54% in 1Q19; 2

3、) sponsored loan volumes have also grown much faster than non-sponsored leveraged loans since 2017, increasing their share to back near pre-crisis peak; 3) Center banks seem to have less risk because are much smaller loan syndicators they dominate non-sponsored leveraged loans; 4) Regional banks are

4、 active in middle market LBO loans US non-banks lead this segment; 5) institutional leveraged loans outstanding growth slowed in February and further in March this may be partly due to a shift into high yield bonds; 6) CLO issuance is solid but down 12% 7) year to date, leveraged loan spreads revers

5、ed over half of the widening seen in 4Q18; and 8) our banks holdings leveraged loans seem manageable, but disclosures limited and consistency is not clear. To conclude, risk in the system seems to have increased given faster growth in LBO loans, but our banks have a smaller share of this activity ot

6、her banks/non-banks are leading this higher riskpart.LBO loan volumes have grown faster recently, up 25%-30% in 2018 1Q19, pushing LBOs up to 40% sponsored loan syndications in 2018. LBO syndicators are three European banks, US non-banks, and a Canadian bank. Money Centers are smaller players, as sy

7、ndicators have to some loans LBOs are riskier. Bank of America was ranked #7 in 2018, Citi (#8), and J.P. Morgan (#14). SunTrust was the largest regional bank at #15, then Citizens (#20). All of the strong growth in LBO loan syndications in 2018 came from largeLBOs.Regionals are more active in middl

8、e market LBOs syndications (loans under $350 mil) than large LBOs. SunTrust is the largest, followed by a newcomer Fifth Third, which had a very large rise in 2018, and thenCitizens.In contrast, growth in non-LBO sponsored loan volumes dropped in 2018 to 7% (-42% in 1Q19). Money Centers have higher

9、market shares here, but European banks and US non-banks were the top players after Bank of America in2018.US Centers dominate non-sponsored leveraged syndications, which are less risky than sponsored loans these volumes fell 20% in 2018. Bank America, J.P. Morgan, and Wells Fargo are the top threesy

10、ndicators.Leveraged growth started 1Q strongly but slowed from Feb onwards reasons unclear but may be partly due to a shift back to high yield bonds. Issuance of high bonds rose sharply, which may partly reflect changes in interest rate outlook with no rate hikes likely this the interest rate risk i

11、n high yield bonds, which are fixed rate, unlike CLOs and leveraged loans. CLO issuance also declined 12% in 1Q but was up 3% qoq. outflows continued 1Q, but the pace slowed versus 4Q. Leveraged loan and high spreads declined sharply in 1Q, reversing well half of the widening seen in 4Q. spreads are

12、 above 2018 troughs but well below 2016 peaks and very far below crisislevels.Leveraged loans held on balance sheet are not disclosed by many banks, and it is not clear that disclosures are consistent. banks that disclose, seem manageable. Most our banks trimmed their holdings of CLOs in 1Q. Wells F

13、argo remains the largest holder of CLOs. Banks mostly hold AAAtranches.See page 27 for analyst certification and important disclosures.North America Equity Research10 April 2019Banks Large-Cap Vivek Juneja AC(1-212) 622-6465 HYPERLINK mailto:vivek.juneja vi HYPERLINK mailto:vek.juneja vek.junejaBloo

14、mberg JPMA JUNEJA Jonathan Summitt(1-212) 622-6341 HYPERLINK mailto:jonathan.summitt jonathan.summittAndrew J Dietrich(1-212) 622-4244 HYPERLINK mailto:aj.dietrich aj.dietrichJ.P. Morgan Securities LLCSelected Recent Reports: HYPERLINK /research/content/GPS-2879734-0 Large Cap Banks: Inst. Leveraged

15、 HYPERLINK /research/content/GPS-2879734-0 Loans Vs Bank C&I Loans In 4Q; Lev. HYPERLINK /research/content/GPS-2879734-0 Loan Spreads Sharp Reversal; Risk HYPERLINK /research/content/GPS-2879734-0 Up A Little, dated January 11,2019 HYPERLINK /research/content/GPS-2783123-0 Large Cap Banks: Whats Dri

16、ving HYPERLINK /research/content/GPS-2783123-0 Slower C&I Loan Growth At Banks: HYPERLINK /research/content/GPS-2783123-0 Lower Demand? Or Huge Surge In HYPERLINK /research/content/GPS-2783123-0 Competition?, dated September 25, 2018J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearch

17、reports.Asaresult,investorsshouldbeawarethatmay a of the of as a HYPERLINK / Leveraged Loans Outstanding Have Grown Sharply Since 2016 In Both Sponsored And Non-Sponsored LoansLeveraged loans outstanding have grown sharply over the past two years to $1.18 tril as of March 31, 2019 from $881 bil at Y

18、E16 per LCD data. Leveraged loans include sponsored and non-sponsoredloans.Sponsored loans outstanding have grown rapidly to $718 bil, up at 19% CAGR from $499 bil atYE16.Non-sponsored loans outstanding have grown to $468 bil, but at a slower rate than sponsored loans, up at 9.5% from $388 bil atYE1

19、6.Figure 1: Leveraged Loans Have Grown in Recent Years to $1.18 trilInstitutional leveraged loans outstanding, $ bilMar 29, 2019: $1.181 trilYoY Growth: 19.4%Mar 29, 2019: $1.181 trilYoY Growth: 19.4%$1,200Figure 2: Sponsored Loans Up to $718 bil, Growing Faster Than Non-Sponsored LoansInstitutional

20、 leveraged loans outstanding by type, $ bilNon-SponsoredSponsored$1,400Non-SponsoredSponsored$1,200$1,000$1,000$800$800$600$600$400$400$200$200$-01/0409/0505/0702/0910/1006/1202/1411/1507/17$-01/0409/0505/0702/0910/1006/1202/1411/1507/1703/19Source: S&P Global MarketIntelligence(LCD).Source: S&P Glo

21、bal Market Intelligence (LCD).But Growth In Non-Sponsored Loans Outstanding Has Slowed Since 3Q18Growth was strong in types of leveraged loans for full year 2018. Sponsored loans outstanding rose 22.8% in 2018, up from 11.5% in 2017. Meanwhile, non-sponsored loans outstanding grew 16.0% in 2018, up

22、from 3.7% in2017.However, as we unpeel 2018, growth in leveraged loans outstandings diverged in the second half of the year growth accelerated in sponsored loans but decelerated sharply in non-sponsoredloans.Non-sponsoredloanoutstandingsweregrowingverysharplyin1H18beforedroppingstartingin3Q18onwards

23、into 2019 growth slowed from 5%-6% qoq in 1H18 to 0.4% qoq in 1Q19. 0.4% qoq compares with 5.7% qoq growth in1Q18.Growthinsponsoredloansoutstandingacceleratedin2018,reaching 6%-8%qoqin2H18.Growth slowedalittleto4.9% qoq in 1Q19, but this is more than double the 2.1% qoq growth seen in1Q18.Figure 3:

24、Sponsored Loans Growing Faster Than Non-Sponsored Loans Since 2017; Sponsored Up at Fastest Rate in Five YearsYoY change, institutional leveraged loans outstanding by typeFigure 4: Non-Sponsored Loan Growth Slowed Sharply in Second Half of 2018, While Sponsored Growth AcceleratedQoQ change, institut

25、ional leveraged loans outstanding by type-12.0%12.4%2.1%Non-Sponsored SponsoredTotal Leveraged Loans 15.4%-8.3%11.5%3.7%16.0%22.8%26.2%10.2%5.7%Non-Sponsored SponsoredTotal Leveraged Loans6.6%4.6%2.1%1.1%6.8%1.9%7.7%0.4%4.9%20152016201720181Q191Q182Q183Q184Q181Q19Source: S&P Global Market Intelligen

26、ce (LCD).Source: S&P Global Market Intelligence (LCD).Syndications Show Similar Trends: Sponsored Loans Hit Record High In 2018, But Non- Sponsored FellSponsored loan syndications (originations) hit a record high of $340 bil in 2018, 14% yoy. This is $18 bil above the prior peak of $322 bil in 2013.

27、 Sponsored loan syndications fell sharply during the crisis years and then recovered in 2013- 2014. Volumes declined thereafter as banks cut back on-balance sheet leveraged lending, but volumes have recovered recently, likely due to growth in non-bankloans.Meanwhile,non-sponsoredleveragedloansyndica

28、tions fellsharply to$282bilin2018.2018volumesweredown20% but similar to 2013 level.As a result, total leveraged loan syndications fell 4% yoy in 2018 to $622 which is still the second highest annual volume onrecord.Sponsored loan syndications recovered back to 54.6% of total leveraged loan syndicati

29、ons in 2018 from 46% in 2017this is close to the pre-crisis high of54.9%.Figure 5: Sponsored Loan Syndications Rose 14% YoY to a Record High $340 bil in 2018 US sponsored loan syndications, $ bil322340322340288299234225177$350$300$250$200$150$100$50$02012201320142015201620172018Figure 6: While Non-S

30、ponsored Leveraged Loan Syndications Fell Sharply to $282 bil US non-sponsored leveraged loan syndications, $ bil351285351285282257231240246$350$300$250$200$150$100$02012201320142015201620172018Figure 7: As a Result, Leveraged Loan Syndications Declined 4% in 2018US institutional leveraged loan synd

31、ications, $ bil650607650607622528466482423$600$500$400$300$200$100$02012201320142015201620172018Source: S&P Global Market Intelligence (LCD).Source: S&P Global Market Intelligence (LCD).Source: S&P Global Market Intelligence (LCD).LBOs Up Recently From Low Share Post-Crisis Of Sponsored Loan Syndica

32、tionsLBOs have grown at a faster rate recently and increased to 54% of sponsored loans in1Q19.Sponsored loans are comprised of LBO loans and other non-LBO sponsored loans (e.g., dividendrecapitalizations, acquisitions).LBOs peaked at 66% of sponsored loan syndications in 2007 and then declined very

33、sharply post-crisis to a little over 20% for severalyears.Figure 8: LBOs Were 40% of Sponsored Loan Syndications in 2018Mix of US sponsored loan syndications, 2018LBO 40%Non-LBO 60%LBO 40%Non-LBO 60%Source: S&P Global Market Intelligence (LCD) and J.P. Morgan calculationsFigure 9: LBOs Share of Spon

34、sored Loan Volumes Has Recovered Sharply from Post-Crisis LowsUS LBO loan syndications as a percent of US sponsored loan syndications65.6%54.0%65.6%54.0%65.0%60.0%55.0%50.0%45.0%40.0%35.0%30.0%25.0%20.0%0607080910111213141516171819Source: S&P Global Market Intelligence (LCD) and J.P. Morgan calculat

35、ions.LBO Loan Syndication Volume Also Up To Post-Crisis RecordLBO loan syndications also hit a post-crisis record in 2018 at $136 bil and were sharply above issuance in recentLBO loan syndications rose 25% yoy in 2018 and were up 30.4% yoy in1Q19.As a proportion of total leveraged loan syndications,

36、 LBO loans rose to 28.3% in 1Q19, up from 16%-17% in2015-2017.Figure 10: LBO Loan Syndications Hit Post-Crisis High in 2018 at $136 bilUS LBO loan syndications, $ bil$200$180$160$140$120$100$0Figure 11: While Growth Remained High in 1Q19 at 30.4% YoYYoY change, US LBO loan syndications35.1%30.4%35.1

37、%30.4%25.0%17.0%-18.8%30.0%20.0%10.0%-10.0%-20.0%Figure 12: Pushing LBOs to 28.3% of Leveraged Loan Syndications in 1QUS LBO loans / US leveraged loan syndications28.3%21.9%28.3%21.9%16.3%16.7% 16.7%25.0%20.0%15.0%10.0%5.0%04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Source: S&P Global Market Intelli

38、gence (LCD).-30.0%151617181Q190.0%151617181Q19Source: S&P Global Market Intelligence (LCD) and J.P. Morgan calculations.Source: S&P Global Market Intelligence (LCD) and J.P. Morgan calculations.However, Growth In Non-LBO Sponsored Loan Syndications Slowed Sharply In 2018, Turned Negative In 1Q19In c

39、ontrast, growth rates of non-LBO sponsored loan syndications fell sharply in 2018 and turned negative in 1Q19. Non-LBO sponsored loan syndications rose 7% to $203 bil in 2018, down from 32%-33% yoy growth in 2016 and 2017. Syndications were down sharply by 41.6% yoy in1Q19.As a result, non-LBO spons

40、ored loan syndications rose to 32.7% of total leveraged loan syndications in 2018 from 26%- 30% in 2017-2017, but then declined to 24.1% in1Q19.Figure 13: Non-LBO Sponsored Loan Syndications Rose to $203 bil in 2018US non-LBO sponsored loan syndications, $ bil$250$200$150$100$004 05 06 07 08 09 10 1

41、1 12 13 14 15 16 17 18Figure 14: But Syndications Growth Rate Slowed Sharply in 2018 and Volumes Fell in 1QYoY change, US non-LBO sponsored loan syndications32.7% 31.9%32.7% 31.9%7.0%-46.4%-41.6%30.0%20.0%10.0%0.0%-10.0%-20.0%-30.0%-40.0%-50.0%-60.0%Figure 15: Non-LBO Sponsored Loans Remain Large Pa

42、rt of Leveraged Loan Syndications US non-LBO sponsored loan syndications/ US leveraged loan syndications32.7%29.9%32.7%29.9%29.3%25.7%24.1%30.0%25.0%20.0%15.0%Source: S&P Global Market Intelligence (LCD).151617181Q19Source: S&P Global Market Intelligence (LCD) and J.P.10.0%151617181Q19Morgan calcula

43、tions.Source: S&P Global Market Intelligence (LCD) and J.P. Morgan calculations.US LBO Loan Syndications Dominated By European Banks, US Non-Banks, And Canadian BanksMoney Center banks are smaller players in LBO loan syndications, which are dominated by European banks, US non- Money Center banks, an

44、d Canadian banks. Bank of America ranked number 7 in 2018, followed by Citi at number 8, and J.P. Morgan at number 14 per LPCdata.Among Regionals, SunTrust stands out at number 15, with LBO loan syndications close to the same level as J.P. Morgan, followed by Citizens ranked20.Table 1: Money Centers

45、 Smaller Share of US LBO Syndications Leaders Are European Banks, US Non-Banks, Canadian BanksUS LBO loan syndications bookrunnerSyndication Volume ($ bil)YoY ChangeLBO Loans / Total Lev Loan SyndicationsRank20152016201720181Q181Q1920152016201720181Q181Q19201720181Barclays-15.1%4.6%-0.4%78.8%2.7%-23

46、.7%7.8%17.2%2Jefferies5.73.012.3NA-46.7%303.1%-7.5%36.3%-45.0%30.1%32.5%3Credit Suisse5.57.09.3-49.6%26.6%34.2%10.3%-18.7%-2.4%10.8%16.0%4Goldman Sachs-50.7%79.1%28.0%38.8%138.4%-30.9%8.0%15.3%5RBC Capital Markets35.1%7.1%35.0%52.5%-46.9%76.4%11.6%21.5%6Deutsche Bank-42.4%18.5%12.3%45.4%-7.0%-18.1%8

47、.2%16.7%7Bank of America-46.3%81.1%38.9%-2.2%-20.4%60.2%5.2%5.8%8Citi23.5%111.0%-30.9%25.9%-47.3%417.1%5.6%9.7%9BMO Capital Markets22.3%-15.1%-2.5%117.3%146.8%-55.4%9.1%18.0%10UBS AG1.00.70.4-77.6%223.8%-4.1%67.0%-19.4%-40.1%16.1%31.4%11Morgan Stanley-38.5%3.1%65.7%-13.7%-60.9%-69.7%8.3%11.8%12KKR &

48、 Co135.9%-68.1%1253.6%27.9%64.1%25.8%15.8%32.6%13Antares HoldingsNA1.01.1NANA47.1%-37.1%-14.7%6.4%38.8%27.2%14JP Morgan2.0NA0.8-66.3%38.2%37.0%11.3%NANA3.0%3.7%15SunTrust Bank4.00.50.2-14.3%76.4%45.8%12.6%9.6%-56.4%9.7%11.2%16Macquarie Group Ltd25.7%23.0%23.1%-12.3%-64.1%180.1%22.6%24.1%17HSBC Banki

49、ng Group47.1%28.5%15.7%96.8%19.8%-0.3%7.6%17.6%18Nomura Holdings23.0%-47.0%55.5%8.7%2.5%-2.4%24.4%24.5%19BNP Paribas SA-12.7%48.1%-18.7%68.4%7.6%-74.3%10.6%13.9%20Citizens Financial GroupNA39.6%241.7%-33.1%-69.7%-33.4%14.6%9.8%Other16.614.024.0-26.5%-15.2%70.9%25.4%-36.5%186.5%0.18.7%Total73.487.812

50、7.1153.319.123.6-22.4%19.6%44.8%20.6%-17.2%23.1%9.1%12.6%Source: LPC and J.P. Morgan calculations.Large Corporate LBO Loan Syndication Volumes Led By European Banks, US Non-Banks We looked at LBO loan syndications in two buckets: large corporate LBOs (deal size $350 mil) and middle marketLBOs (deal

51、size $350mil).Large corporate LBO loan syndication volumes are also led by European banks, US non-banks, and a Canadianbank,who accounted for the top 8 lead syndicators in 2018 per Dealogic data. Most of these banks gained share in 2018.Among US banks, Bank of America was the highest at number 9 ran

52、k, followed by Citi at number 10, J.P. number 12, SunTrust number 16, and Wells Fargo number19.Private equity firms have been rapidly building LBO loan syndication businesses over the past couple of years asseen in HYPERLINK l _bookmark0 Table 2Table 2: Large Corporate LBO Loan Syndication Volume Le

53、d by European Banks, US Non-Banks, and a Canadian BankUS LBO loan syndications, deal size greater than $350 milSyndication Volume ($ bil)YoY ChangeRank20152016201720181Q181Q192016201720181Q181Q191Barclays24.1%24.6%76.1%-2.9%19.8%2Goldman Sachs2.02.41.4117.0%13.2%97.2%243.9%-43.0%3Credit Suisse24.2%-

54、12.8%52.8%-29.7%89.7%4RBC Capital Markets9.00.71.478.9%52.8%56.7%-60.9%90.2%5Jefferies LLC-9.5%174.2%-11.3%187.7%-61.8%6Deutsche Bank-18.2%6.5%64.3%6.3%25.0%7Morgan Stanley5.91.00.244.2%60.6%15.1%-40.8%-83.2%8UBS1595.1%-14.0%215.7%153.5%-78.7%9Bank of America173.7%15.7%11.6%-4.7%164.6%10Citi-4.9%-13

55、.5%25.8%-82.7%1247.6%11BMO Capital Markets3.51.00.5-52.1%181.6%178.9%330.9%-51.6%12JPMorgan175.4%45.7%32.0%-56.5%229.5%13KKR-61.5%1421.7%12.6%294.1%49.5%14Macquarie Group44.4%34.8%-4.4%-50.8%396.4%15Nomura-50.2%98.6%22.2%17.0%-22.8%16SunTrust172.0%25.6%84.4%-3.2%17.7%17HSBC90.6%82.1%117.1%-2.2%47.0%

56、18MUFG-0.10.5NA-23.7%1643.7%-51.1%686.2%19Wells Fargo Securities1.7-0.9-68.6%677.2%48.1%NANA20Antares Capital LP946.9%37.5%-34.3%31.2%-53.1%Other3.74.610.722.1%134.8%79.0%-50.4%321.5%Total42.756.382.332.0%46.1%49.6%8.2%36.1%Source: Dealogic and J.P. Morgan calculations. As of April 9, 2019. As Are M

57、iddle Market LBO SyndicationsMiddle market LBO syndication volumes are led by US non-banks, who have gained significant market share and are 2 out of the top 4 players. They are followed by European banks. US non-banks and European banks were the top 9 middle market LBO loan syndicators in 2018 per

58、Dealogicdata.Bank of America the largest US bank syndicator in 2018, ranked at number 11, followed by SunTrust at number Fifth Third number 15, and Citizens number 16. Fifth Third rose sharply in 2018 from almost no volume in2017.Table 3: Middle Market LBO Loan Syndication League Table Led by US Non

59、-Banks, Followed by European BanksUS LBO loan syndications, deal size less than or equal to $350 milSyndication Volume ($ bil)YoY ChangeRank20152016201720181Q181Q192016201720181Q181Q191Jefferies LLC13.1%602.2%17.7%257.5%-85.4%2Antares Capital LP135.7%145.2%-26.0%14.0%-13.3%3Credit Suisse-40.5%557.9%

60、-0.3%51.5%-76.2%4Goldman Sachs0.00.50.11252.4%534.1%2.2%6.9%-73.1%5Deutsche Bank-19.9%319.2%53.2%25.2%-34.3%6Barclays0.10.00.2-75.4%3200.9%43.0%421.0%-50.2%7BNP Paribas42.7%-37.6%121.1%122.7%-88.2%8KKR0.0-0.41.00.3-100.0%NA151.5%104.6%-100.0%9Macquarie Group0.70.00.91.00.40.1-97.3%4532.5%11.4%473.3%