November 2024

There is a renewed sense of cautious optimism forming for the economic cycle ahead, fueled by the expectation of declining interest rates combined with indicators that the Fed has pulled the appropriate levers over the past two years to mitigate the recession risks looming over corners of the market.

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However, regardless of the macro conditions, across this broad spectrum of sectors below, operator skill continues to drive opportunity and outcomes and increasingly, we’re seeing that the companies that we finance find the most success when they have both a vision and versatility in their DNA and can adapt no matter the prevailing financial conditions and regulatory environments.  Here’s our outlook on several of the industries we finance:

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Commercial & Industrial (C&I)

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BHI is set to book another strong year on the C&I front featuring double-digit growth for the year and the anticipation for similar tailwinds for the current year.  The market has embraced the expectation of declining interest rates (50 bps this year and with another 150 bps expected through next year) and that’s creating a cautious optimism for a sector like this that typically involves heavy capex spend.   

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As rates decelerate and go down, manufacturing operators who have postponed high capex equipment purchases or facility expansions are more apt to invest in their growth.  With International C&I, we’re seeing increases in spending, especially with Israeli firms identifying opportunities in the U.S. and expanding to other markets beyond, while also seeing no deterioration or pauses in activity from to the ongoing war in Israel. 

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It’s not a market of universal and unequivocal uptrends across the board, however, as the monthly inflows of data points continue to oscillate between conflicting trends showing how the sector is simultaneously shining and slipping.  But expanding out toward a more macro view, overall the trend lines from 2020 to 2024 show that the U.S. is setting a strong pace, particularly across the South and we anticipate that to continue.

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Furthermore, M&A activity often readily finds this sector and while we don’t anticipate seeing an M&A market that rivals the industry-wide fever activity of 2022, the trajectory of the rate environment and sightlines toward a ‘soft landing’ are positioning toward more opportunities on that front. 

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Food & Beverage

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The big boom that the Food & Beverage sector experienced during COVID seems to be continuing.  And while inflation’s impact on prices has forced some companies to adjust to consumers ‘value-seeking behaviors,’ the ever-evolving set of tastes and trends, especially pertaining to the health and wellness category will continue to fuel demand for offerings that match those prevailing consumption habits.

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Retail (Apparel & Consumer Goods)

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There’s a return to normalcy, of sorts, occurring in the Retail sector across apparel and consumer goods.  Apparel clients are still attuned to potential supply chain issues and have become adept at more efficiently managing through their higher inventories and preserving pricing power.

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Hi-tech

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We’re keen on elements of this sector—such as fintech and cyber—which have particularly turned toward raising more capital and have become attractive targets for M&A and other large-scale deals.  The sector, more broadly, is not suffering for any lack of activity, however, we’re noticing an ongoing shift whereby funding is following firms earlier in the funnel, attracting investments from venture capital and private credit which aren’t always beholden to the same levels of regulatory guidance and compliance as the banking industry. 

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Energy

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Renewable energy continues to shine as a bright spot of increased activity with considerable projectable growth ahead.  Strong tailwinds like the $52 billion CHIPS act, designed to spark stateside manufacturing projects that emphasize chip fabrication plants, electric vehicle battery factories and other clean energy projects has also led to over $910 billion in private investment as well. 

Our pipeline of deal flow in the renewable sector continues to expand and we anticipate demand increasing for the foreseeable future.

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Overall, these sectors project to remain strong and led by skilled developers and operators who have honed their craft over the previous years and are poised to continually seek responsible growth ahead. We look forward to helping our partners and prospective clients develop their projects and find the best financing to support those goals.

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BHI takes relationship banking seriously and is fully committed to knowing our Clients and meeting their business needs to help provide essential business financing.  Whether it’s cash infusion to fuel your day-to-day operations or a more complex financing solution for your long-term goals, your BHI relationship manager offers a comprehensive range of financing and credit options including revolving lines of credit, C & I loans, and letters of credit.

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• John Yoler is Executive Vice President and the U.S. Head of Commercial & Industrial Banking at BHI, overseeing BHI’s C&I teams across New York, New Jersey, Florida, California and beyond.  His domains of expertise stretch from food & beverage vertical, specialty and sponsor finance, high tech, international, investment services, and treasury management.

• To learn more, Contact Us to connect with John or another subject matter expert from our team.