Thoughts on the Third Quarter 2019 Asset-Based Lending Index

By SFNet Data Committee

Q3 2019 results generally demonstrate the continuation of trends observed throughout 2019.  Year to date, we continue to have growth in the industry as a whole and credit quality remains solid.  There are a few notable deviations from trends observed throughout the year as we will see. For details, click here.

General economic conditions continue to be top of mind for the secured finance community, but it is interesting to note that we continue to see a divergence between Bank and Non-Bank Lenders with respect to the SFNet Confidence Index. As a reminder, starting in 2019, we have chosen to divide the ABL lender universe along Bank and Non-Bank lines, as opposed to our previous methodology of splitting up the ABL lender universe by portfolio size.

SFNet Confidence Index

The SFNet Confidence Index is based on responses from senior executives.  They revolve around anticipated activity or conditions in the forward three-month period.  As seen in the summary below, there are some notable differences in the outlook of Bank and Non-Bank lenders.  The SFNet Confidence Index responses are on a 3-point scale where a response of “1” indicates a decrease/decline, a response of “2” indicates that things are expected to stay the same and a response of “3” indicates that the expectation is an improvement/increase.

One of the notable areas where responses diverge is the forward outlook for business conditions taking into account the economy overall.  Bank lenders are somewhat pessimistic with an average response of 1.81 (a score which is below 2.0, the level whereby things are expected to remain the same).  This is in sharp contrast to the Non-Bank average score of 2.50, a level which is significantly higher than the Bank score as well as materially higher than the Non-Bank score from the prior quarter (which was hovering around 2.0).  It is also interesting that Bank lenders have a Portfolio Performance score below 2.0, albeit an increase from the prior quarter, whereas Non-Bank lenders have a Portfolio Performance score above 2.0 with a decrease compared to prior quarter.  One possible explanation is that Non-Bank lenders may view uncertainty with broader economic conditions as an opportunity for new business while Bank lenders may not share this view.  The Non-Bank lenders also seem to acknowledge that this may come at the expense of Portfolio Performance (which is still above 2.0, but with a rather large negative change quarter over quarter).

Survey Category

Bank Score (with change vs. prior quarter)

Non-Bank Score (with change vs. prior quarter)

Economy/Business Conditions

1.81 (-0.03)

2.50 (+0.42)

Portfolio Performance

1.94 (+0.15)

2.08 (-0.17)

Demand for New Business

2.25 (+0.09)

2.58 (+0.25)


2.06 (-0.05)

2.27 (+0.10)

Hiring Expectations

2.13 (-0.13)

2.08 (-0.19)


Commitments, Outstandings and Utilization

Total Commitments for Bank Lenders was $252.5B for Q3 2019, up compared to both the prior quarter (+1.8%) and the same period in the prior year (+6.6%), continuing the growth trend noted in 2019.  While Commitments were up, Outstandings were flat quarter over quarter at $111.1B.  Similarly, Utilization (Loans Outstanding as a Percent of Total Commitments) was basically flat at 44.8% in Q3 2019 compared to 44.9% in Q2 2019.  Utilization is down from the peak level noted in Q1 2019 of 45.6%, a high point which we believe may have been driven by some noise and disruption in the broader credit markets around Q4 of 2018.  In Q1 2019, we noted in our analysis that absent any unforeseen changes or market conditions that we expected utilization for the Bank segment to level off and start to decline and that appears to be the case as of Q3.    

For Non-Bank Lenders, the trends were generally the same, but with higher growth in commitments at 4.3% growth quarter over quarter and 17.9% growth year over year to $4.69 in Q3 2019.  Similar to Bank lenders, Outstandings were relatively flat quarter over quarter with growth of 1.7% to $2.264B.  Utilization (Loans Outstanding as a Percent of Total Commitments) by Non-Bank Lenders was down quarter over quarter to 49.3%, a decrease from 50.5% in Q2 2019 (which was the highest point since 2015).  While this has come down somewhat, utilization is still generally at an elevated level relative to the past few years.

Credit Quality

Credit quality remains solid in Q3 2019 with Bank Gross Write-Offs as a % of Total Outstandings at a level near historic lows at 0.018% for the quarter.  While Gross Write-Offs hovered near historic lows, there was a notable uptick in Non-Accruing Loans as a % of Total Loans Outstanding as Non-Accruals came in at 0.77% in Q3 2019, the highest level in a single quarter since 2016.  Whether this will translate into higher Write-Offs in the coming quarters remains to be seen, but this is something to watch.  Bank Criticized or Special Mention Loans also had an uptick relative to the prior quarter at 12.3% compared to 11.8% last quarter.  This reverses a downward trend noted since Q3 2017, however, 12.3% is still well below the Q3 2017 level of 15.2%.


The industry continues to grow and credit quality remained very strong, but sentiment among Bank lenders is less positive than it has been in the past.  Non-Bank lenders, however, are more bullish and see business conditions improving in the short term, perhaps with a view of capitalizing on perceived uncertainty with general economic conditions.  While credit quality remains strong, the uptick in Non-Accruals and, to a lesser extent, the increase in Criticized or Special Mention Loans is something to keep an eye on.  It is far too early to say that we should expect a decline in credit quality in coming quarters as Write-Offs remain near historic lows.  Overall, this quarter was a solid one for the ABL industry.

If you find our industry analysis helpful, we strongly encourage you to participate in future surveys if you are not already doing so.  We try to provide meaningful reporting, but having participation from all of our lender members will ensure that we provide the best industry information possible. Please contact Michele Ocejo at or Aydan Savaser at for details.