(Bloomberg) — A group of regional U.S. banks is increasing lending to oil, gas and coal customers, grabbing market share as Europe’s biggest rivals retreat.
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The list of banks includes Citizens Financial Group Inc., BOK Financial Corp. and Truist Securities Inc., according to data compiled by Bloomberg. The companies have climbed between 13 and 40 rungs in the rankings of fossil fuel lenders since the end of 2021, placing them among the top 35 global banks in terms of number of transactions. Fifth Third Securities Inc. and US Bancorp, already in the top 30, both climbed 10 steps during the same period.
Since the start of 2022, the combined number of fossil fuel loans made by Citizens Financial, BOK Financial, Truist Securities, Fifth Third and US Bancorp has increased by more than 70% on an average annualized basis, compared to the previous six years, according to the Bloomberg agency. data exposure.
Spokespeople for Truist, Fifth Third and US Bancorp declined to comment.
Rory Sheehan, a spokesperson for Citizens Financial, said the bank supports initiatives enabling the transition to a low-carbon future. He also said the bank recognized the role of the oil and gas industry.
The development offers insight into how the U.S. banking landscape is changing amid stricter climate regulations across the Atlantic. Regional U.S. lenders – reeling from the crisis following the collapse of Silicon Valley Bank – are participating more in fossil fuel-related lending as European banks begin to pull back, for fear of being caught on the wrong side of the environmental, social and governance regulations and climate disputes. .
“Someone betting heavily that demand for fossil fuels will continue to increase significantly is clearly adopting a view that is at odds with existing forecasts,” said Jean Boissinot, head of the secretariat of the Network for a Smarter Financial System. Green, hosted at the Banque de France and includes officials from central banks around the world. “I would like to make sure they understand the implications of this kind of gamble.”
Read more: Regional banks most vulnerable to returns for decades: macro view
BNP Paribas SA, the European Union’s largest bank, and ING Groep NV, the Netherlands’ largest lender, are among the banks expanding restrictions to fossil fuel customers. The companies, both of which are currently battling lawsuits from climate nonprofits, have fallen about 10 spots in the rankings of oil, gas and coal lenders over the past two years.
Wall Street’s biggest banks, meanwhile, remain among the fossil fuel industry’s biggest lenders. Last year, those loans were dominated by Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co., according to Bloomberg data.
Some of the U.S. regional banks that are stepping up their oil, gas and coal lending are based in states that have passed or are revising anti-ESG laws. In Oklahoma, which implemented its Energy Discrimination Elimination Act at the end of 2022, local bank BOK Financial recently climbed the rankings to become one of the 30 most active fuels dealmakers in the world fossils.
Marisol Salazar, senior vice president and head of energy banking at BOK Financial, says the bank now sees “a lot more opportunity” in the fossil fuel industry.
“We’re not just picking up customers,” she said. “We’re also recruiting talent, we’re recruiting engineers, we’re recruiting investment bankers, we’re recruiting experienced relationship managers.”
For fossil fuel borrowers, this development means they can continue to access credit at prices that remain competitive. This is a development that challenges some assumptions about divestment policies, when it is clear that fossil fuel companies are finding alternative sources of financing.
“For smaller credits, there might be a little more aggressiveness in terms of pricing,” Salazar said. “But overall, you’ll see some pretty common terms.”
From its headquarters in Ohio, whose Senate also passed anti-ESG legislation, Fifth Third was recently among three banks that replaced Barclays Plc in a $325 million loan to ProFrac Holdings, a hydraulic fracturing company. Indeed, the British bank imposes restrictions on customers with high carbon emissions as part of its climate policy.
It’s not just small banks that are making more fossil fuel loans. Jason Kerr, a partner in the energy group at law firm White & Case, says he sees commodity traders moving in as some big banks pull back.
In Africa, where Kerr’s work is focused, the scale of change is “dramatic,” he said.
“Large international oil traders are moving from fairly simple financing to quite complicated financing arrangements,” Kerr said. “Previously, they entered the market with a basic pre-payment for oil, but they are becoming more and more similar to conventional banks.”
It also appears that banks are in some cases being replaced by private credit managers eager to gain a foothold in fossil fuel transactions.
Read more: Banks turning away from fossil fuel private credit deals
The value of private credit transactions in the oil and gas industry has exceeded $9 billion in the 24 months through 2023, compared to $450 million transacted in the previous two years, according to data provided by Preqin, an analytics company that tracks the alternative investment industry.
The result is that even as banks exit the fossil fuel sector, “the replacements are coming and the financing continues,” Kerr said.
Read more: Oil at $150, GDP down $1 trillion, a risk in direct war in the Middle East
Historical oil prices ($/barrel)
–With help from Tyler Kazio.
(Updated with BI outlook for oil.)
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