Awaiting a rise in interest rates, they point to energy as the culprit
PHILADELPHIA, PA–(Marketwired – March 25, 2016) – From the first quarter Phoenix Management “Lending Climate in America” Survey, results shows lender confidence on the U.S. economy continues to deteriorate.
The 1Q 2016 survey continues the recent trend of lenders increasing pessimism about the future.
Lenders confidence on how they expect the U.S. economy to perform beyond the next 6 months has fallen 11 points from a grade point average of a 2.13 in the previous quarter to a 2.02 in Q1 2016.
Similarly, their GPA for the U.S. economy during the next 6 months has also decreased 11 points to a 2.00. Sixty-seven percent of lenders, compared to fifty percent the previous quarter, believe that unstable energy prices will have the strongest impact on the economy in the next six months.
Customers predicting ‘no-growth’ on the rise
Echoing these sentiments, expectations for commercial lending are at their lowest point in 7 years, lenders report that the percentage of their customers who expect no growth in the next 6 to 12 months more than doubled to 27%, and the percentage of lenders anticipating a tightening of their loan structures increased from 12% in Q4 to 17% in Q1.
Countering these negative sentiments, lenders indicated a slight across-the-board uptick in their financial institution’s plan to reduce interest rates, and they showed a marked shift in their expectation to increase leverage multiples.
Twenty-two percent of lenders indicated the > 3.5x range would be the highest EBITDA ratio they would consider, a 7 percentage point increase from the prior quarter, and the percentage of respondents who would consider a debt to EBITDA ratio of 3.0-3.5x increased 12 percentage points to thirty-seven percent.
“In the survey, twenty-seven percent of lenders believe the economy will perform at a ‘D’ level in the next six to twelve months, which is sixteen percentage points higher than the previous quarter,” says Michael Jacoby, Senior Managing Director and Shareholder of Phoenix. “It’s concerning to see that lenders continue to remain doubtful about the prospects for the U.S. economy.”
To see the full results of Phoenix’s “Lending Climate in America” Survey, please visit here.
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