March 11, 2025 - Earlier this week, the federal banking agencies published their Shared National Credit (SNC) 2024 report highlighting findings from their semi-annual reviews. The report assesses risk in credit facilities syndicated among at least three banking institutions with aggregate loan commitments of $100 million and nonbanks. The 2024 SNC sample covered 34% of the $2.96 trillion in agent bank-identified leveraged lending commitments (which represent 45% of total SNC commitments) and 28% of the roughly 2,500 agent-bank identified individual borrowers.
According to the report, U.S. and foreign banks continue to own the largest share of SNC commitments (approximately 80% in aggregate), while nonbanks hold the largest share of special mention and classified (i.e., non-pass) loans (26.8% compared to 9.3% for banks).
In 2024, SNC commitments totaled $6.5 trillion, a modest increase of 1.8% year-over-year (with 87% of the increase reported as investment-grade loans). Special-mention commitments decreased 8.4% YoY and classified commitments increased 9.7% YoY. Nonaccrual commitments increased 29.1% YoY.
The report found that SNC credit risk remains moderate, with a modest increase in risk resulting from the migration of commitments from special mention to classified ratings amid higher interest rates and margin compression in certain industries. Non-pass commitments increased to 9.1% in 2024 from 8.9% in 2023.
In their 2024 reviews, the bank agencies focused on the commercial services, healthcare and pharmaceuticals, materials and commodities, real estate and construction, and technology, telecom and media industries (TTM). Technology, telecom and media (TTM) showed the highest non-pass rate at 19.7% (compared to 19.3% in 2023). While commercial real estate demonstrated the lowest non-pass rate of the focus industries at 8.2%, it accelerated from 5.7% in 2023, driven by a decline in credit quality in the office sub-sector.
The agencies continue to note that credit risk related to leveraged lending remains high, as evidenced by the fact that while leveraged loans comprise 45% of total commitments, they represent a disproportionately high percentage of the total non-pass exposures (79% of special mention commitments and 84% of classified commitments). The share of special mention and non-pass loan commitments held by banks increased in 2024 (to approximately 40% vs 35% in 2023), and although nonbanks continue to hold a disproportionate share of special mention and non-pass loan commitments, their exposure trended down (approximately 60% vs 65% in 2023). This represents 9.3% and 26.8% of total commitments for banks and nonbanks, respectively (compared to 8% and 27.5% in 2023). This shift in part reflects the change in total commitments among nonbanks (down 2%) compared to banks (up 2.8%) in 2024.
The report notes that the magnitude and direction of risk in 2025 will be impacted by borrowers’ ability to navigate interest expenses, real estate conditions, and other macroeconomic factors.
