Bank Earnings Get Mauled by “Leveraged Loan” Time Bomb

by Wolf Richter
Wolf Street

Distress ratio spikes to Financial Crisis level.

Banks have a few, let’s say, issues, among them: a source of big-fat investment banking fees is collapsing before their very eyes.

S&P Capital IQ reported today that there was an improvement in the “distress ratio” of junk bonds, after nearly a year of brutal deterioration that had pushed it beyond where it had been right after Lehman’s bankruptcy. The recent surge in oil prices seems to have lifted all boats for a brief period. But not “leveraged loans.” Their distress ratio spiked to the highest levels since the Financial Crisis!

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