Banks losing patience with marginal borrowers

May 10, 2007
The dreaded bank workout department isn't what it used to be for marginal borrowers, say two Indianapolis veterans who have watched the industry for decades.

Until a couple of years ago, banks still were willing to help struggling companies through tough patches by restructuring loans and offering guidance in finding their way out of the woods.

Now, banks are much quicker to cut off borrowers, said Dave Hamernik, a partner in Hamernik LLC.

Hamernik, one of the region's most seasoned turnaround specialists, said his namesake firm is diversifying into helping sell companies because banks have less patience with keeping troubled loans on the books.

While the firm still is known primarily for turnaround consulting, its growth is coming through helping buyers conduct due-diligence, and coordinating investment bankers and brokers.

Relatively small loans of $1 million or $2 million no longer are cost-effective for banks to send to workout, Hamernik said. That means less business for firms like his.

"It's a trend," he said. "There's tremendous pressure on the banks" to make money.

Banks insist they work closely with borrowers to help ensure both parties succeed, and that they haven't lost patience.

Chase hasn't cut its "managed asset" department, said spokeswoman Nancy Norris. "It's in our best interest that the client succeeds, so we help them do that," she said.

Steve Beck, who has held executive positions in several local banks and now is raising money for a seed fund for entrepreneurs, said the patience part of the banking axiom "In good times be prudent, in bad times be patient" has gone out the window.

"Of late banks have lost their seasoned commercial officers and have not done a good job of training young officers to deal with problem companies," said Beck, who still tracks the industry.

Hamernik said banks are under so much pressure to turn profits that he doubts many companies with as much as $25 million in revenue ever again will receive traditional workout treatment.
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