JPMorgan ‘open for business’ in leveraged loans as rivals get stuck with losses

Jan 13 (Reuters) – JPMorgan Chief Monetary Officer Jeremy Barnum advised traders the financial institution is “completely open for enterprise” in leveraged lending at the same time as different U.S. banks are anticipated to guide vital losses on dangerous loans underwritten final yr.

“Phrases are higher, pricing is healthier, we have now the assets wanted,” Barnum mentioned on a convention name with analysts. “We’re absolutely there. No overhang and no challenge.”

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

After vital losses on debt gross sales final yr, together with a $700 million loss on an $8.5 billion debt bundle funding the buyout of software program maker Citrix Methods Inc, main banks have largely chosen since then to soak up debt they’d underwritten earlier within the yr.

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

Final summer season, Financial institution of America collectively led a bunch of banks to supply $13 billion in loans and bonds to Elon Musk for his acquisition of social media big Twitter. The banks have since struggled to get the debt off their books at an inexpensive value, as a substitute selecting to carry the debt.

When requested whether or not these caught offers would constrain lending exercise by massive banks like JPMorgan, which has been much less energetic than its friends, Barnum mentioned the overhang is already mirrored in costs and banks are capable of take in losses on current offers.

“There’s a little bit of a story that exercise available in the market wants to beat an overhang,” Barnum mentioned. “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 can be reported in quarterly outcomes. The precise quantity stays to be seen, because the banks determine 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 mentioned firm accounts for leveraged loans in its outcomes, with out giving particulars on any massive offers.

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