Banks Market Share

Delivered March 14th, 2018. Contributors: Lisa L., Tehreem F., Rachel M. and

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Market Share of Mid-Market Commercial Lending Banks - U.S.

The estimated 2017 market share of mid-market commercial lending banks in the U.S., while not found among pre-existing statistics, may be triangulated based on the commercial lending activity of the nation's top 5 largest banks.  Per the National Center for the Middle Market, we have defined the middle market as consisting of the "U.S. companies having annual revenues from $10 million to $1 billion."  The largest of those banks, Bank of America, lent about 1.02% of the total loans in all US based banks to mid-market commercial borrowers by 3rd quarters end in 2017.  Assuming that there is no change, based on the current rate of growth, commercial lending should grow from $902 Billion to $1,081.68 Billion in about 5 years.  Below you will find our deep dive into how we came to these conclusions, as well as the estimated market shares of the other 4 leading US banks.
Top 5 commercial Lending banksThe top 5 commercial lending banks are Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and US Bancorp.  The mid-share commercial lending market shares of these banks are $96.66, $68.66, $53.66, $52.99 in Billions, respectively.  About 40% of all outstanding loans across U.S. commercial banks is represented by these banks.  In order to highlight the commercial area of lending we focused on the statistics of the loans based on loan category.  Focusing on the commercial loans of the banks, we were able to triangulate the mid-market shares based on the fact that the middle market makes up about 1/3 or 33.3% of the private sector.  The total loans in all US based banks for 3rd Quarter 2017 were derived from the 3rd quarter 2016 plus the YoY growth of 4.9%. {Q3 2016 = $ 9,017 billion
YoY Growth = 4.9%; Q3 2017 = $9,017 billion + 4.9% = $9,458.83 billion (total loans in all U.S. based banks)}

Using this figure, total commercial loans of the top 5 banks which is equal to $902 billion is 9.54% of the total loans in all US based banks. {Total loans = $ 9,458.83 billion, Commercial loans = $ 902 billion 
     ( $902 / $ 9,458.83) * 100 = 9.54 %  (percentage of commercial loans vs total loans)}

Figures from two different Forbes articles show total loans and total commercial loans, regardless of their market group (small market, middle market, etc.). In order to get how much of the commercial loans is for mid-market group, we relied on data from Merrillcorp. Here mid-market was identified as 1/3, or 33.33%, of all the market groups. To get the amount of commercial loans of the top 5 largest bank in the U.S, I multiplied the amount of each bank’s Q3 2017 loan to 33.33%.

Additionally, to get the market growth in this area in the next 3-5 years, we used the percentage of growth of these banks according to Forbes which is 3.7% assuming that there is no change.
Commercial loans 2017 = $902 billion x 3.7% per year
2018 = $ 935.37 billion
2019 = $ 969.98 billion
2020 = $ 1,005.87 billion
2021 = $ 1,043.09 billion
2022 = $ 1,081.68 billion
ConclusionThe market shares of the top 5 mid-market commercial lending banks in the U.S. are  $96.66, $68.66, $53.66, $52.99, and $29.00 1.02%, 0.73%, 0.57%, 0.56%, and 0.31% for Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and US Bancorp, respectively.  The market is expected to grow within the next 5 years.

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Market Share of Mid-Market Commercial Private Credit Funds - U.S.

In the absence of preexisting data, triangulation resulted in an estimated market share of mid-market commercial private credit funds of $7.5 billion in the U.S. as of 2017. The growth rate of the mid-market commercial private credit funds' was estimated to be 11.5 percent in 2020. A detailed account of how these figures were calculated is given below: 
Market Share of Mid-Market Commercial Private Credit Funds — U.S.
Data on the market share of mid-market commercial private credit funds in the U.S. is not found among preexisting statistics, thus triangulation was required to deduce the size of the market. The 2016 figures of global private credit industry, amounting to $600 billion with a CAGR of 20 percent, 34.0 percent industry lending in global SME/Mid-market corporate and 12.4 percent (7.5+4.9) industry lending happening in global real estate and infrastructure were used to narrow down the global private credit industry to the global mid-market commercial lending figure.

Calculations are shown below: 

Global Private Mid-Market Credit Industry Size as of 2016=34% of 600 billion= (34/100*600) =204 billion
Using 20% CAGR size in 2017: 204*(1+20/100)^1=244.8 billion
Global mid-market commercial lending market: (244.8*12.4/100)=$30.4 billion

This figure was converted to U.S. denominations by assuming that the percentage of mid-market commercial private credit funds' contribution to GDP was the same in the U.S. as it was in the world. 

As of December 2016, US GDP as percentage of World GDP amounted to 24.58%. Multiplying this percentage with the global mid-market commercial lending market of $30.4 billion resulted in an estimated size $7.5 billion of the mid-market commercial private credit funds in the U.S. as of 2017. 

2020 Prediction of market growth In the absence of preexisting data, triangulation using similar method as above was used to calculate the predicted market growth in the mid-market commercial private credit funds in the U.S. Using the expected CAGR of 20%, global private credit industry was estimated to be around $1 trillion in 2020. The global mid-market commercial private credit funds would amount to (12.4% of 34% of 1000 billion) $42.2 billion with $10.4 billion (24.58% of 42.2 billion) being the US mid-market commercial private credit funds in 2020. 
Using these figures, the growth rate was calculated:
Size in 2017=7.5 billion
Size in 2020=10.4 billion
CAGR=[(10.4/7.5)^(1/3)-1]*100=11.5%
ConclusionThe market share of mid-market commercial private credit funds was estimated using triangulation to amount to $7.5 billion in the U.S. as of 2017. The mid-market commercial private credit funds' growth rate was calculated to be around 11.5 percent in 2020. 

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Market Share of Mid-Market Commercial Business Development Companies - U.S.

OVERVIEWAccording to the FCS Commerical Finance Group, 20 to 40 business development companies aimed at serving the mid-level market exist, with a total value of $30B. Due to the scarcity of data on this emerging market, it is necessary to limit the focus to the top five business development companies, in order to stay within the scope of the question. The top five BDC's in question are Ares Management, L.P., with a market capitalization of $4.86B, American Capital, Ltd., with a market capitalization of $3.89B, Main Street Capital, with a market capitalization of approximately $2.154B, Corporate Capital Trust, with a market capitalization of approximately $2.023B, and Apollo Investment Corporation, with a market capitalization of $1.16B. Considering that BDC's hold a combined portfolio value of approximately $30B, it is important to note that the aforementioned Top 5 companies have capitalized on just 47% of the market, with the remaining companies securing the remaining 53%. According to TCW, the BDC sector has grown exponentially, to boasting over $80B in assets today. TCW goes on to say that, despite this relatively sudden increase, this market still accounts for only approximately 10% of the market, pointing to a bright future for business development companies
TOP FIVE BDC'sAs data on this emerging industry is scarce, in the interest of remaining within the scope of the question at hand, this brief will focus on the top five BDC's and their respective share of the market.
Leading the pack is Ares Management. With a market capitalization of 4.86B, it can be calculated against the total market cap of $30B to find that this top company holds 16.2% of the market. Closely trailing behind Ares Management is American Capital, Ltd., claiming 12.96% of the market cap (calculating their share of $3.89B against the total market cap of $30B.) After American Capital, Ltd., Main Street Capital comes in 3rd, securing 7.18% of the total market cap (calculating their market cap of $2.154B against the total market cap of $30B.) Behind Main Street Capital is Corporate Capital Trust, sharing 6.7% of the market cap (calculating their market cap of $2.023B against the total market cap of $30B). The final company in the top five is Apollo Investment Corp., claiming 3.86% of the market cap (calculating their share of $1.16B against the total market cap of $30B.)
INTERPRETATIONIn total, these top five companies share 47% of the total market capitalization (adding all companies' market capitalization and calculating the total against the total market capitalization of $30B). This means that, understanding that the $30B BDC market consists of 20-40 companies, 53% of the $30B market capitalization is shared by 15-35 companies (removing the top five companies from the approximation of 20-40 companies).
CONCLUSIONLooking toward the future, an exact projected rate of expected growth of the BDC market is not available. However, TCW notes that the industry has exponentially increased their market share to $80B. Despite this sudden increase in growth, the BDC market shares just 10% of the market overall, leading one to assume that this is a relatively untapped market with room to grow.
In conclusion, the Business Development Company market is a relatively fragmented industry as of late, with the top five industry leaders claiming just 47% of the $30B market capitalization, and lacking one true industry leader to claim the majority of the market share. This being said, the TCW predicts that, given its notable burst in profitability, there is much room to grow in the BDC industry.