SFNet hosted a webinar Friday, May 14, from 12:00 p.m. – 1:00 p.m., titled "The Data You Need to Plan Ahead." The webinar was open to employees of SFNet member organizations and SFNet Chapter members only and provided analysis behind the numbers for the Secured Finance Foundation (SFFound) Market Pulse Report, the Foundation’s Annual ABL and Factoring Surveys as well as Refinitiv’s Capital Markets League Table for Q1. For those who would like to access the webinar, it is archived on SFNet’s site and can be found here.

The webinar featured industry leaders and data experts discussing highlights of the annual surveys SFNet conducts as well as analysis from Refinitiv and Keybridge to gain insight into what’s happening in the industry and portfolios.

Panelists included Barry Bobrow, managing director, Wells Fargo Securities; Miin Chen, COO, Siena Lending Group; Lawrence Chua, managing director, Ares Management LLC; Maria Dikeos, global head of Loans Contributions, Refinitiv; Terry Keating, president of Accord Financial’s US Asset Based Finance unit and Robert Wescott, president, Keybridge Research.

Miin Chen kicked off the webinar with a review of the key findings for ABL in 2020 for nonbank lenders and bank lenders.

“For the asset-based lending world, it was definitely a year of two stories between the bank and the nonbank sectors,” Chen said, adding that the bank sector grew by about 4 billion while the nonbank sector grew about 1.3 billion. The majority of the growth for the nonbank sector came in late q3 and q4 of 2020.

Terry Keating of Accord Financial discussed the findings from the SFNet Annual Factoring Survey.

“Of course, volumes were down significantly, which was no surprise given the pandemic conditions and this impacted revenue. But when we look at the look at revenue as a percentage of earning assets, which gets to the yield, we see an interesting story that, not surprisingly, given the change in risk profile, the percentage of revenue went up in the year. This was most particularly in the service fee category, which very likely has to do with the stretching of receivable payments through the pandemic, with many of us were providing accommodations to our clients, but, then in turn, being able to charge a fee for doing so,” Keating noted.

Keating also pointed to the not surprising significant uptick in gross write offs for the year in factoring, while recoveries remained relatively the same. Overall, though pre-tax profits were relatively stable from the prior year, highlighting the durability of the industry.

Maria Dikeos of Refinitiv discussed three core themes that emerged across the leveraged loan market at large and observed in the asset-based loan market: the quick turnaround and snapback seen year over year in the market last year, due to liquidity support from the Fed, clarity around vaccine availability, and the functionality of the virtual office environment; market elasticity; and the re-emergence of club deals where a smaller grouping of lenders in the syndicated loan market take larger pieces of the emerging deals coming to market.

“We saw that towards the end of the year, in the fourth quarter, with the return of edgier repricing and a handful of really small or relatively small acquisition deals that were just incredibly well received in the market,” she added.

Syndicated ABL volume in the first quarter totaled $26.7 billion, up 67%. year over year, and there were 66 deals completed through retail syndication, in the first quarter of 2021, about a 6.5% increase over the same time last year. Dikeos added. There was also less M&A ABL financing for ABL amid more market liquidity, with some corporates sitting on a lot of cash and opting to self-fund or tap the bond market. The bond market itself was wide open making it easier to bring a combination of ABLs and bonds or term loan Bs to market depending on what made sense from a relative value perspective.

Renowned economist and strategic advisor to past administrations, Fortune 500 firms, and leading financial institutions, Dr. Robert Wescott of Keybridge then discussed SFFound’s latest Market Pulse, a periodic report that informs lenders about emerging economic trends likely to affect secured lending and their borrowers’ industries over the coming quarters. SFFound's Market Pulse bridges the gap between the secured finance market, the broader economic landscape, the Washington policy world, and emerging risks, including inflation risks.

Dr. Wescott was bullish on U.S. economic growth over the rest of 2021, expecting it to be the fastest economic growth of any year since Ronald Reagan’s Presidency.

“Consumers have money in their pockets, and they are spending it,” Wescott said. “We have been tracking a lot of alternate data series, high frequency data, and we are seeing a return of confidence in the in the economy.”

One cautionary tale, Wescott said, is that labor markets remained challenging.

“We lost about 20 million jobs last April. And this number is still stunning. If you look at all the improvement we've had since then, even though we've had some very good numbers, it still doesn't make up for the losses in one-month last year.”

As vaccines continued to rollout, combined with those who’ve already had COVID and have some immunity, Wescott predicts the U.S. will be close to herd immunity by late June, and predicts eventually 85% of the American economy is going to revert to form, including dining out, going to the movies and returning to the office, resembling what it looked like in the fourth quarter of 2019.

For changes, there will be reduced business travel, with the single biggest decline on intra company travel, Wescott said. Instead of five people from an office visiting another office in a different city, there may now be only two.

“COVID has permanently, in my opinion, killed cash,” Wescott added. “It also has sped up the decline of brick-and-mortar retailing. I don't think that's coming back.”

Increases of retail sales and consumer spending with clothing, furniture, home sales are seeing strong numbers.

“This sector is getting back on its feet, so that overall, the key markets you lend into are getting healthier,” Wescott said, adding that residential construction is booming but non-residential is not, due to weakness in hotels, retail space and offices.

He says we are already seeing evidence of rising commodity prices but believes the key thing to watch is if commodity inflation morphs into service-sector inflation. 

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