Several of the U.S.’s largest banks are seeing record levels of bad corporate loans, according to reports published late last week.
The latest data found a 67 percent increase in the instance of bad loans to corporates lent from the nation’s three largest banks: Bank of America, JPMorgan Chase and Wells Fargo.
The levels of bad business loans are now at their highest since 2013, according to reports.
JPMorgan’s bad loans doubled in the fourth quarter of 2014 to $2.21 billion, reports said. Bank of America’s are now at $1.6 billion, a 32 percent increase, with Wells Fargo’s increasing 64 percent to $3.97 billion.
Much of Wells Fargo’s jump can be attributed to its acquisition of corporate loans from GE Capital, reports noted.
Analysts are pointing to weak oil prices and their impact on related industries, with crude oil prices dropping more than 60 percent from mid-2014.
Reports highlighted that bad corporate loans still make up less than 1 percent of these banks’ total assets and that the last several years have seen a decline in the rate of bad loans.
According to Standard & Poor’s Director of Corporate and Financial Institutions James Elder, there is evidence that industries beyond energy, like health care, are showing more signs of default risk.
Portales Partners banking analyst Charles Peabody agreed.
“We’re at the very early stages of an inflection point in corporate credit quality, and it’s getting worse from here,” the analyst told reporters.
Figures from the Federal Deposit Insurance Corporation show that the lending sector has added $1.43 billion to funds covering bad loans in Q4 2015. It marked the first time that banks added to these reserves since 2009, Bloomberg said.
China is also in the midst of a surge in bad corporate debts, according to reports last month.