small business lending trends
TRANSCRIPT
2013 Small Business Credit Trends
Patricia Hines, CTP
Director, Financial Services Industry Marketing
GXS
Slide 2 © 2013 GXS, Inc.
Small businesses confidence dips in early 2013 after 2012 gains
80.0
85.0
90.0
95.0
100.0
105.0
1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13
February 2013: 90.8
January 2006: 101.6
NFIB Optimism Index
Sources: NFIB Small Business Economic Trends Quarterly report
Slide 3 © 2013 GXS, Inc.
Sources: Federal Reserve System H.8 Release
Commercial and industrial loans up almost 14% over the past year
$17 $17 $16 $16 $15 $14 $14 $14 $14 $14
$16 $15 $13
$12 $12 $13 $13 $14 $15 $15
$33 $32
$30 $28 $27 $27 $28 $28 $29 $30
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
12/08 12/09 12/10 12/11 12/12
Commercial real estate Commercial and industrial
Slide 4 © 2013 GXS, Inc.
Small business loans outstanding flat with a continued increase in volume
Sources: FDIC Quarterly Banking Profile, Loans to Small Businesses
Amount outstanding (USD in billions)
Number of loans outstanding (in thousands)
120.3 120.2
46.8 46.9
115.7 116.7
0
50
100
150
200
250
300
12/31/2011 12/31/2012
282.7 283.7 +0.4%
19.6 20.8
0.5 0.5 0.4 0.4
0.0
5.0
10.0
15.0
20.0
25.0
12/31/2011 12/31/2012
20.4 21.7
+6.3%
> $100K $100k to $250K $250K to $1M
Slide 5 © 2013 GXS, Inc.
Delinquency rates continue to improve for all loan types except residential real estate
11.2%
10.6% 9.1%
4.6%
3.6%
6.7%
2.8% 2.4% 3.8%
2.6%
1.2%
4.4%
1.2% 0%
2%
4%
6%
8%
10%
12%
1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12
Residential real estate loans
Commercial real estate loans
Credit card loans
Consumer loans
Commercial & industrial loans
Sources: Federal Reserve Statistical Release
Slide 6 © 2013 GXS, Inc.
$46$51
$55$60
$67$71
$75$79 $82 $85
$92$95 $96
$0.3$0.4 $0.5
$0.3 $0.3
$1.0
$0.5
$1.3
$1.3
$2.3
$2.1
$2.1
$1.9
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$0
$25
$50
$75
$100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Unpaid principal balance Charge off amount
Charge-offs (USD billions)Principal balance (USD billions)
In 2012, Small Business Administration lending jumped up with charge-offs leveling off
Est.
Sources: Small Business Administration budget and performance reports
Slide 7 © 2013 GXS, Inc.
-70%
-50%
-30%
-10%
10%
30%
50%
70%
90%
3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13
Small C&I loan demand Small C&I loan standards
Large and medium C&I loan demand Large and medium C&I loan standards
Loan demand
Loan standards
Commercial and industrial (C&I) loan demand reflects economic uncertainty
Quarterly percentage change
Sources: Federal Reserve Board senior loan officer opinion survey
Slide 8 © 2013 GXS, Inc.
2.4%
3.6%
4.0%
1%
2%
3%
4%
5%
3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12
More than $1,000,000 $100,000–$1,000,000 Less than $100,000
Spreads narrowing, especially for large C&I loans
3.3%
1.4%
2.1%
3.2%
4.0%
2.0%
1.6%
Sources: Federal Reserve survey of terms of business lending
Spread percentage
Slide 9 © 2013 GXS, Inc.
4
6
8
10
12
14
16
18
0%
2%
4%
6%
8%
10%
1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13
Business bankruptcy filings Unemployment percentage
Unemployment percentage Number of filings (000s)
Es
Business bankruptcy filings a bright spot in the picture for small business risk
4.7%
10.0%
7.7%
Sources: American Bankruptcy Institute, U.S. Bureau of Labor Statistics
Est.
Slide 10 © 2013 GXS, Inc.
0%
1%
2%
3%
4%
Up to $300M $300M to $1B $1B to $10B $10B to $20B Over $20B
2009 2010 2011 2012
Smaller banks continue to struggle with non-performing commercial loans
3.9%
Ratio of non-performing commercial loans to total
commercial loans (%)
Sources: Federal Reserve Bank of St. Louis
0.7%
Slide 11 © 2013 GXS, Inc.
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2009 Actual 2010 Actual 2011 Actual2012
Projection 2013 Forecast
DevelopingAsia
LATAM
CIS*
United States
Japan
Euro Area
2012 did not meet expectations, recovery stalls for 2013
3.8%
0.8%
3.9%
7.8%
2.2%
*CIS = Commonwealth of Independent States (former Soviet Republics)
1.6%
Sources: International Monetary Fund World Economic Update January 2013
Percent change in GDP
Slide 12 © 2013 GXS, Inc.
Trade payables and receivables at 12-year lows
11.7%
14.1%
10%
12%
14%
16%
18%
20%
22%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Trade Payables Trade Receivables
Recessionary Periods
Percent of company net worth
Sources: Federal Reserve Bank of St. Louis
Slide 13 © 2013 GXS, Inc.
• Risk metrics continue to show a mixed bag, but underlying improvement
seems to be taking hold
• Small Business Credit Index points to improving environment for small
businesses by end of 2013, and continuing into the next couple of years
• Small business lenders continue to lend to borrowers who meet their
desired risk/reward profile
• Close monitoring needed to identify emerging adverse trends and
minimize loan losses
• Investments in credit analytics and
monitoring tools continue to pay off,
reflected in decreases in non-performing busi ness
loans
Parting thoughts
Slide 14 © 2013 GXS, Inc.
Thank You and Q&A
Patty Hines, CTP Director, Financial Services Industry
Marketing
E-mail: [email protected]