Foreign-owned banks in the United States are pulling back from broad commercial lending activities and focusing instead on specific industries and project finance, according to a survey.
Loan Pricing Corp., A New York-based research firm that tracks corporate bank lending, reported that foreign banks participated in 5,183 syndicated loans over the 12 months that ended Sept. 30, down 9.3% from the average for the previous two years.
The report, released Monday, attributed most of the broader decline to a reduction in activity among Japanese banks, which have been lending less because of capital shortfalls.
But as foreign banks retreat from general commercial lending, they are increasing activity in "specialty lending segments," the Loan Pricing report noted.
The firm named health care, communications, oil and gas, utilities, and project finance as the main sectors in which foreign banks are boosting lending to U.S. borrowers.
Foreign bankers have made no secret of their disenchantment with low spreads and recent losses on large corporate lending deals over the past year, and their preference for more profitable transactions with U.S. companies in stronger sectors.
"Officials at foreign banks say the move toward specialty markets is an effort to obtain better yields on loans perceived to be less risky than traditional, wide-margins credits," the Loan Pricing report noted.
In added that Japanese banks, in particular, have shifted lending from highly leveraged transactions to project finance, energy, and communications.
In a recent interview, Andre Levy-Lang, chairman of France's Banque Paribas, said his bank is focusing on structuring lending to the health care and energy sectors where it can bring specialized expertise and structure more complex, and more profitable, deals.
"We've decided to be very focused," Mr. Levy-Lang said.
Project finance, another area that requires specialized knowledge of a complex array of transactions to structure a deal, is also attracting foreign banks, particularly large Swiss, British, and Japanese institutions.
Nearly 80% of the 314 banks that provided about $12 billion in loans for project finance last year were foreign, according to Loan Pricing.
Overall, foreign banks accounted for 46% of 11,258 banks that participated in large corporate loans, compared with 48% during the previous 21 months.
Besides increasing specialized lending, foreign banks aim to boost earnings by helping arrange loans instead of simply participating in syndications.
Foreign banks acted as agent or co-agent in 20.5% of the deals in which they participated, up from an average 7.6% over the previous 21 months, according to Loan Pricing.