Technology is back among the sectors in favor with lenders, especially software developers and communications technology and hardware companies, according to a new survey.
Phoenix Management Services said most of the 78 responses to its quarterly survey of banks, thrifts, and nonbank lenders nationwide were received shortly before or after the Fed's March 25 rate hike.
Overall, the respondents saw the economy as steadily improving. They gave it a B-plus, the highest grade since March 1996, when they graded it C-plus.
"Lenders view the economy more positively than they have at any time in the last several years," said E. Talbot "Tal" Briddell, president of Philadelphia-based Phoenix, a turnaround specialist.
"Their outlook on the economy and their customers' businesses is very positive, and most expect interest rates to increase during this period of economic growth, which is typical of a strong economy," he said.
Over all, 75% of the lenders said their customers expect their businesses to grow moderately over the coming six months, and 3% foresaw very strong growth.
Light manufacturing was the top pick among lenders; 80% expressed strong interest in it, up from 65% in the quarter before. Companies in industrial distribution, service, heavy manufacturing, and transportation also scored well.
About 33% of the respondents planned to market actively to technology companies, roughly the same percentage as last quarter, which was the highest since the survey began, in November 1995.
The telecommunications sector, in particular, is gaining momentum. "That's the hottest and will continue to grow," said R. Bram Smith, managing director and head of loan syndications at Morgan Stanley.
The loan market's appetite for large syndicated technology loans, such as Chase Manhattan's $2 billion credit for Sprint Spectrum last year and its new $500 million loan backing a $1.8 billion financing for Lucent Technologies, is still strong, Mr. Smith said.
Specifically, the lenders said they planned to market to software companies (26%), communications technology companies (24%), and hardware companies (23%).
Retailing trailed the pack for the fifth quarter in a row. Twenty-eight percent of the lenders said they had reduced exposure to the sector, and 36% said they planned to do so over the next six months.
Lenders were also shifting focus away from construction, retail distribution, real estate, and start-ups in general, the survey found.