Bridgeport, Conn.-based People's Bank is ramping up a commercial and industrial loan portfolio and a commercial real estate portfolio after scoring some excess capital from the sale of its credit card business. The bank is primarily investing in leveraged loans, but is looking at some investment-grade names, mainly in the middle market. It is buying for the balance sheet and is looking to generate $300 million in new commitments for each portfolio this year, said Ellen Davis, senior v.p. in People's commercial banking division, who is leading the effort.
People's is buying both term loans and working capital loans. "We're good at lending. We have extremely strong asset quality and very, very, clean commercial portfolios," Davis underlined.
There has been a movement by banks back into the loan market fold, including the leveraged loan product. Banks have worked through the credit cycle and are now looking to lend, according to market participants (LMW, 10/13). Davis believes banks are back in the asset class. But she added, "A lot of the good transactions are oversubscribed, mostly because of the institutional investors, not necessarily the banks."
Davis said pricing is better on loans rather than other asset classes such as mortgage backed securities and collateralized debt obligations. "The general strategy is to build up our relationships with the arrangers and the agent banks," said Francis McGinn, a v.p. with People's, who previously worked at TransAmerica Business Capital. The bank will initially target the primary market but will explore secondary market opportunities as they arise, McGinn said. "We're not specifically targeting the secondary market out of the box."
People's has six senior lenders with three in commercial and industrial and three in commercial real estate, with the areas kept separate. The bank is not actively looking for more staff members. "We're going to see how we do and if we grow as anticipated, we will probably expand towards the latter part of the year or early next year," Davis said.