The delinquency rate for bank loans to U.S. and foreign companies climbed to 1.3% at the end of 2024, the highest level recorded since 2017, according to data from BankRegData. Businesses struggled to meet debt obligations, with $28 billion in overdue payments—a $2.2 billion increase from the previous quarter and a $5.4 billion rise compared to the previous year.
Despite the surge, delinquencies remain well below the 5% peak seen during the 2008 financial crisis, indicating that the situation, while concerning, is not yet at crisis levels.
Who’s Feeling the Strain?
Most corporate bank loans have variable interest rates, meaning that as market rates increase, so do borrowing costs. While large corporations are generally navigating these challenges well, small and mid-sized businesses are facing increasing financial strain. Many companies that borrowed heavily during the era of low interest rates are now struggling to adjust to the new economic reality.
Banks Remain Optimistic
Despite the rise in delinquencies, major banks remain confident in business resilience. Bank of America reported a 5% growth in loan activity in the fourth quarter of 2024, while J.P. Morgan and Citigroup also noted continued strong business sentiment among borrowers.
As interest rates remain elevated, businesses will need to adapt to the changing financial landscape. Whether the delinquency trend worsens or stabilizes will depend on broader economic conditions, potential Federal Reserve rate cuts, and companies’ ability to refinance debt effectively.
Sources: BankRegData, FinancialTimes, PYMNTS.
