2010 US Small Business Risk Outlook
Location: New York
Author:
Jamie Born
Date: Friday, April 30, 2010
The commercial real estate collapse has removed a major source of growth for banks. Maxed out consumers are not positioned to drive loan growth at the bank in the near future. As a result, bank CEOs are turning to business banking as the key growth driver. With deposits pouring into the bank, the next big challenge is where to profitably and safely find earning assets among commercial and industrial customers.
To avoid the next bubble and find the most profitable business customers, bankers need to consider the differing risk profiles of borrowers, industries and geographic sectors. The 2010 Small Business Risk Outlook presents the historical default rates for the past 5 years and default estimates through year-end 2010 for small businesses in the US. The Outlook is derived from PayNet AbsolutePD®, created by Professor Darrell Duffie, Dean Witter Professor of Finance at Stanford University Graduate School of Business. PayNet AbsolutePD estimates defaults for business borrowers, portfolios, geographic sectors or industries to safely and profitably find and manage profitable business customers.
The 2010 Small Business Risk Outlook provides the roadmap to profitable business decisions and helps avoid dead ends.
Major findings from the 2010 Small Business Risk Outlook for Q2 are as follows:
- Default rates are estimated to fall from over 5% in 2009 to 4% by year end 2010.
- Risk is elevated versus its long-term average of 3.6% with defaults estimated to be 4%.
- Risk is above its long-term average for all geographic sectors.
- FL is the highest risk region for small business with estimated default rates at 6.4%.
- N. Central showed greatest improvement of all regions followed by CA and then the SW.
- New England and Mid-Atlantic are higher risk at 5.2% and 4.9% respectively.
Borrower Default Rates
|
1/1/2005 |
1/1/2006 |
1/1/2007 |
1/1/2008 |
1/1/2009 |
1/1/2010 |
Max |
Avg |
Min |
|
| Sector/Region | Actual | Actual | Actual | Actual | Actual | Predict | |||
| California |
2.5% |
2.9% |
3.0% |
4.8% |
7.0% |
4.2% |
7.0% |
3.8% |
2.2% |
| E. Great Lakes |
3.3% |
2.2% |
2.8% |
4.5% |
4.4% |
3.7% |
5.1% |
3.4% |
2.1% |
| Florida |
3.4% |
2.3% |
5.6% |
8.1% |
8.4% |
6.4% |
8.9% |
5.3% |
2.3% |
| Mid-Atlantic |
3.6% |
2.4% |
4.9% |
5.0% |
5.0% |
5.2% |
6.4% |
4.2% |
2.1% |
| New England |
2.7% |
3.1% |
3.2% |
3.6% |
4.5% |
4.9% |
6.8% |
4.0% |
2.6% |
| New York |
2.3% |
2.6% |
3.6% |
4.9% |
5.2% |
4.1% |
6.1% |
3.9% |
2.2% |
| North Central |
1.7% |
2.1% |
2.0% |
3.4% |
6.4% |
2.9% |
6.8% |
2.8% |
1.4% |
| Northwest |
1.7% |
2.5% |
1.8% |
4.4% |
4.8% |
3.1% |
5.2% |
2.9% |
1.3% |
| PA+NJ |
3.3% |
1.9% |
3.0% |
4.0% |
5.3% |
4.3% |
6.4% |
3.7% |
1.9% |
| South Central |
3.6% |
2.8% |
4.1% |
4.4% |
5.2% |
3.9% |
5.8% |
3.9% |
2.8% |
| Southeast |
3.1% |
2.9% |
3.7% |
5.7% |
7.2% |
4.8% |
7.3% |
4.4% |
2.8% |
| Southwest |
2.4% |
2.0% |
2.8% |
5.1% |
6.9% |
3.8% |
7.5% |
3.5% |
2.0% |
| TX+OK |
4.5% |
2.4% |
2.8% |
4.4% |
7.0% |
4.9% |
7.0% |
4.1% |
2.1% |
| W. Great Lakes |
2.1% |
2.1% |
2.8% |
3.6% |
4.7% |
3.3% |
4.7% |
3.0% |
2.0% |
| Max |
4.5% |
3.1% |
5.6% |
8.1% |
8.4% |
6.4% |
|||
| Avg |
2.9% |
2.5% |
3.2% |
4.6% |
5.8% |
4.2% |
|||
| Min |
1.7% |
1.9% |
1.7% |
1.7% |
3.4% |
2.1% |
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