14 Feb, 2023
Some US banks grow lending to energy in Q4'22; BofA carries largest portfolio
By Maricor Zapata and Robert Clark
Some of the biggest U.S. lenders increased their exposure to the energy sector in the final quarter of 2022, data gathered by S&P Global Market Intelligence showed.
Of 12 select U.S. banks with more than $50 million in energy exposure at year-end 2022, eight increased their loan portfolio to the energy sector, while four reduced their exposure.
Room for growth
"There's a little bit of growth room left there," said Jason Estes, president of Oklahoma City-based Bank7 Corp. The bank posted the biggest annual increase in energy loans in the analysis at 85.5%. Energy comprised 14.4% of the bank's gross loans as of the end of 2022, up from 9.6% in 2021 but down from over 18% four years ago.
On the company's fourth-quarter 2022 earnings call, executives stressed that Bank7 is closely monitoring its energy concentration.
"We don't want to get too far into the energy markets," Estes said. "And so we're doing that on a very selective basis with rapid amortization."
For McKinney, Texas-based Independent Bank Group Inc., which booked the second-biggest year-over-year rise at 67.7% in energy exposure, lending to the energy sector is "a positive," as the company aims to diversify its balance sheet.
"We're seeing great opportunities there," Independent Bank Group Chairman and CEO David Brooks said during the company's fourth-quarter 2022 earnings call. "We're still only about 4% of our overall loan book in energy. So we think that's an area that can continue to grow a little bit as we go forward."
Energy exploration and production loans accounted for 98.6% of Independent Bank Group's total energy loan portfolio of $574.7 million as of Dec. 31, 2022, according to the bank's Feb. 9 investor presentation.
On the other hand, Pine Bluff, Ark.-based Simmons First National Corp. almost halved its energy exposure in 2022 to $53 million. The other banks in the analysis that reduced their loan portfolios in the energy sector were San Antonio-based Cullen/Frost Bankers Inc., Houston-based Prosperity Bancshares Inc. and Gulfport, Miss.-based Hancock Whitney Corp.
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Proportion to gross loans
BOK Financial Corp. was the most exposed to the energy sector as of Dec. 31, 2022, with outstanding energy loans accounting for 15.1% of its gross loans.
Bank of America Corp., which raised its energy exposure by 6.4% from a year ago, still had the most outstanding loans in the energy sector in the fourth quarter of 2022 at $15.13 billion, accounting for 1.4% of its loan portfolio. Wells Fargo & Co.'s energy portfolio, which rose 13.2% to nearly $10.00 billion, was 1.0% of its loan portfolio.
Click here to see the energy exposure data in Excel.