Houston’s Green Bank to stop energy lending

A Houston bank has stiffly put the energy business behind it.

Green Bank is a $3.9 billion lender in Houston and it’s in the process of cutting its exposure to energy loans. The bank’s exposure has gone from 9.4 percent at the end of 2015 to 3.8 percent at the end of last year. It’s plans to further reduce this exposure in the first quarter is part of a strategy to sell off hundreds of million dollars in energy loans held by drillers and oil field service companies.

“Our energy exposure has largely been resolved and we can now finally return to the business of banking,” said Manuel Mehos, chairman and chief executive of Houston financial company Green Bancorp., the parent company of Green Bank., during a conference call with investors this week.

According to the bank, it has sold off or borrowers have paid off $157 million of its $250 million energy loans since April, which is when it chose to unfurl the business entirely. Green Bank has about $95.5 million in energy loans remaining, about 85 percent of which is held by oil field service firms. With another $24 million in energy loans held for sale, it is expecting for its energy exposure to be reduced to 3.1 percent in the first quarter.

Even as oil and gas companies benefit from rising crude prices, analysts say banks will likely be the last lenders to pour cash bank into the energy industry. The two-year oil bust left banks and high-yield debt investors wary.

“A number of these firms got burned,” said John Castellano, managing director at consultancy AlixPartners. Castellano noted oil companies have turned to public equity markets to raise more expensive capital from stock-market investors. Oil explorers have raised $48.6 billion from secondary stock offerings over the past two years, according to data collected by Bloomberg. “There is capital available (from public equity markets and private equity firms). But it’s a cautious recovery.

Green Bank’s chief credit officer, Donald Pershbacher, noted the Texas economy has been improving as energy jobs are increasing, especially in the Permian Basin in West Texas. “That’s not to say that we’re going to be lending to energy,” he added.

Article written by HEI contributor Lydia Ezeakor.

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