Banks cut lending by 55% in 2008
U.S. loan issuance fell to the lowest volume since 1994 as banks repair balance sheets, shun underwriting new, risky deals.
NEW YORK (Reuters) -- U.S. loan issuance in 2008 tumbled 55% to $764 billion, the lowest volume since 1994, as the global credit crunch choked off lending to American businesses, according to data from Reuters Loan Pricing Corp.
Loan issuance was down from $1.69 trillion in 2007 as banks focused on repairing balance sheets damaged by mortgage losses and had little interest in underwriting riskier deals, RLPC reported on Tuesday.
Investment-grade loans fell to $319 billion, down 52% from 2007's 658 billion, while leveraged loan issuance slid to $294 billion, down 57% from $689 billion in 2007, RLPC said.
JPMorgan (JPM, Fortune 500) was the lead issuer for U.S. loans in 2008, with $198.5 billion, or 26% market share, followed by Bank of America (BAC, Fortune 500), with $137.4 billion, or 18% market share, and Citigroup (C, Fortune 500), with $116 billion, or 15% market share.
Lending will likely remain anemic in 2009, according to an RLPC quarterly survey of loan market participants. Nearly 54% of respondents said their lending will be limited to key relationships.
Institutional loans were especially hard hit as collateralized loan obligations disappeared from the market. Loans purchased by institutional investors slid to $69.6 billion, down 84% from 2007's $425.8 billion.
Loans backing leveraged buyouts, a key source of loan growth for the past several years, were down by 80% to just $41.3 billion from $209.9 billion.
Much of the loan slump came in the second half of the year, after Bear Stearns collapsed and Washington Mutual Inc. (WM, Fortune 500) was seized by regulators, sending convulsions through the financial system.
As banks scrambled to limit risk, bridge or temporary loans became the only viable funding source for many companies. A $14.5 billion one-year bridge loan backing Verizon Wireless' (VZ, Fortune 500) acquisition of Alltel Corp was the largest deal of the year in the loan market, according to RLPC. 
