US banks see healthcare industry as growth engine in 2021

U.S. banks are comfortable with their exposure to the industry at the forefront of the COVID-19 pandemic.

S&P Global Market Intelligence analyzed healthcare exposure disclosures of greater than $500 million at 19 U.S. banks that reported earnings up to Jan. 28. While the COVID-19 pandemic has put stress on various industries, many U.S. banks are reporting stable conditions for the healthcare sector, mostly attributed to federal and local assistance, and some are hoping to grow their healthcare business lines in 2021.

Lancaster, Pa.-based Fulton Financial Corp. reported the largest quarter-over-quarter percentage increase in healthcare exposure among companies in the analysis. The bank reported $1.1 billion in outstanding healthcare and social assistance loans, a 15.3% increase from Sept. 30, 2020. The industry makes up 5.9% of the company's gross loans.

Tulsa, Okla.-based BOK Financial Corp. reported $3.3 billion in outstanding healthcare loans, a slight decline of 0.6% from the linked quarter. A decrease in hospital system loans offset the growth in senior housing loans, Stacy Kymes, executive vice president of corporate banking, said on the company's fourth-quarter 2020 earnings conference call. However, the bank's healthcare portfolio was up 9% year over year due to growth in balances from hospital systems clients with strong credit profiles, he said.

"Looking forward, we remain confident in our healthcare portfolio's long-term growth and credit outlook and expect to be a growth leader once again after the health and economic conditions migrate to a more normal state," Kymes said.

Cleveland-based KeyCorp also expects some of its long-term growth to come from the healthcare industry. After purchasing Laurel Road Bank's digital lending business in 2019, the bank plans to launch a digital bank at the end of March that will expand its offerings for healthcare clients to include deposits and more lending products, the company announced on its fourth-quarter 2020 earnings conference call. Currently, Laurel Road offers student loan refinancing, graduate school loans, mortgages and personal loans for healthcare professionals.

"We believe that both Laurel Road and consumer mortgage will continue to be relationship-based growth engines for our consumer business," Chairman, President and CEO Christopher Gorman said on the call.

Many U.S. banks with healthcare exposure are comfortable with it and reported that the sector has remained stable throughout the COVID-19 pandemic. Sioux Falls, S.D.-based Great Western Bancorp Inc.'s $1.0 billion in outstanding healthcare and social assistance loans remains stable with minimal movement in risk ratings, Chief Credit Officer Stephen Yose said on the company's fiscal first-quarter earnings conference call. The company's healthcare portfolio makes up 10.1% of its gross loans.

"The mix of the portfolio across senior care, assisted living and retirement communities, skilled nursing, hospitals and other health services and social assistance has us in a comfortable position, and we remain highly engaged with our customers to stay on top of any early indicators," he said.

Federal and local assistance has helped the healthcare system remain stable. Puerto Rico-based Popular Inc. reported $1.6 billion in healthcare facilities loans for the fourth quarter of 2020, a slight decline of 0.4% from the prior quarter. The company's exposure in Puerto Rico is mainly concentrated in hospitals, while its exposure in the rest of the U.S. is mainly concentrated in skilled nursing facilities. Federal and local assistance has supported the industry and led to only a moderate amount of deferrals and downgrades in the portfolio, Lidio Soriano, chief risk officer of its corporate risk management group, said on the company's fourth-quarter 2020 earnings conference call.

Click here to see the healthcare exposure data in Excel.