do commercial banks hold onto the loans they underwrite?
like BMO Harris, HSBC, Wells Fargo... the middle market loans.
I would imagine that they just make the underwriting fee and want to syndicate it out. Just like how investment banks do it.
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bump. Where's my commercial bankers at??
Do you have an offer?
And the answer is it depends, they could sell it to another bank. It varies situation by situation.
Also a syndicate could also mean that other banks will be underwriting loans just a small part though. So you're not entirely wrong.
My main question is: for the middle market loans, do these banks talk to institutional lenders to unload it off their balance sheet?
In my experience (not middle market though), the answer is yes, the lead banks will usually maintain a high allocation of the loan (8-12%) and receive the administrative agent, documentation agent, and/or syndication agent titles.
Middle Market (depending on your definition) typically holds a portion and allocates out the remainder. The allocated portion goes to other MM banks however not institutionals.
Source: 9+ years in MM Commercial/Corporate Banking.
This is helpful SKC. I find that interesting. With the regulation on capital ratios and balance sheet restrictions, wouldn't the middle market deals be syndicated out to institutionals? I guess the hurdle rate on the paper might be worth holding onto for the banks.
It really depends on your definition on MM. Most banks say it's somewhere between 50M and 500M in revenues. Deals in that market typically aren't large enough for institutions to want a piece. And the pricing is usually not high enough.
Also, Banks are very hungry for assets. So hungry in fact that pricing has crept down to pre recession levels and we are moving back to cov lite structures.
what i mean is... say a $30-$50mm term loan by Wells Fargo or BMO. They want to hold that onto their balance sheet? Institutional investors would love that paper if they could get their hands on it. Even like the floating rate ETFs.
loans that small most banks will hold themselves. why get rid of it if you are WF? you are getting squat for a return on deposits and that loan will pay you Libor + 150 to Libor + 350. because alot of customers shrunk their businesses during the recession, W/C borrowings are not back to where they used to be so everyone is starving for assets.
with Dodd Frank, etc. everyone has way more capital and not enough places to put it.
Agree w/SKC. I think most are holding commercial loans. I would guess (again, I don't work with or have insight into that side) that loans would be pooled and sold via CDOs, not just unloaded like mortgage origination.
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