Re: any help for projects!!!!!1
ankit08lucky
Largest Syndicated lenders in the United States in 2006
Name Market share
JP Morgan 28.9%
Banc of America Securities LLC 21.4%
Citigroup 14.7%
Wachovia 5.6%
Wells Fargo 4.8%
Deutsche Bank AG 3.4%
Royal Bank of Scotland Group 2.1%
Goldman Sachs & Co 2.0%
Merrill Lynch 1.9%
Barclays Capital 1.8%
Credit Suisse 1.8%
Reasons for syndicated lending
Like insurance, a loan is an assumption of risk. For a certain class of loan, with certain rules, the bank might believe that it is likely that 5% of all borrowers may go bankrupt. If the bank's cost of funds is a hypothetical 5%, the bank needs to charge more than 10% interest on the loan to make a profit. In general, banks and the financial markets use risk-based pricing, charging an interest rate depending on the risk of the loan product in general or the risk of the specific borrower. The problem with larger businesses loans, however, is that there are fewer of them. So, if the bank has the only large business loan and if that business happens to be one of the 5% that defaults, then the bank loses all its money. For this reason, it is in the best interest of all banks to split, or "syndicate" their large loans with each other, so each get a representative sample in their loan portfolios.
A second, often criticized reason for syndicating loans is that it avoids large or surprising losses and instead usually provides small and more predictable losses. Smaller and more predictable losses are favored by many management teams because of the general perception that companies with "smoother" or more steady earnings are awarded a higher stock price relative to their earnings (benefiting management who is often paid primarily by stock). Critics, such as Warren Buffett, however, say that many times this practice is irrational. If the bank could still get a representative sample by not syndicating, and if syndication would reduce their profit margins, then over the long term a bank should make more money by not syndicating. This same dynamic plays out in the investment banking and insurance fields, where syndication also takes place.
To avoid the borrower having to deal with all the syndicate banks individually, one of the syndicate banks usually acts as an Agent for all syndicate members and acts as the focal point between them and the borrower.
