The amount of bad business loans held by the nation's top 100 lenders soared 26% last year, a rate of deterioration reflecting the toll that recession has taken on banks' asset quality.
Bankers were aware that business loans soured at a stunning pace last year, but this is the first time that the results have been tallied in this way.
Non-current commercial and industrial loans on the books of the top 100 domestic business lenders rose to $17.8 billion at year end 1990, from $14.1 billion a year earlier, according to American Banker. These loans are 90 days past due or placed on non-accrual status.
"My hunch is most of the increase in dollar terms came from HLT-related credits," said Judah Kraushaar, a bank analyst at Merrill Lynch & Co., referring to loans classified as highly leveraged transactions. Kraushaar's view is widely shared by other experts.
The category does not include real estate loans, an even bigger problem for banks.
Last year's sharp deterioration occurred as overall business lending stalled. Slack demand by borrowers combined with lenders' tighter standards kept banks from adding new loans as sick loans multiplied.
Total business loans outstanding at the top 100 banks were virtually unchanged at $393 billion, compared to $389 billion at the end of 1989.