The trucking industry, once a booming sector, is now facing a credit crisis that is causing concern among US banks¹. After a pandemic-era boom, trucking firms are struggling to turn a profit, and in some cases, such as that of Yellow Corp. and Convoy Inc., shutting down amid declining demand, rising costs, and stagnant freight rates¹.

The Current State of the Trucking Industry

Several US banks have experienced credit quality deterioration during the third quarter due to a slump in the trucking industry¹. The most dramatic example of this is the failure of Sac City, Iowa-based Citizens Bank, which faced losses related to the sector¹.

Industry analysts have noted that after a pandemic-era boom, trucking firms are now struggling to turn a profit¹. This is due to a combination of declining demand, rising costs, and stagnant freight rates¹. Some companies, such as Yellow Corp. and Convoy Inc., have even had to shut down¹.

The Impact on Banks

The deteriorating asset quality metrics in the trucking portfolios have been observed in several banks in the third quarter¹. Triumph Financial Inc., for instance, saw its nonperforming loans to total loans ratio increase to 1.22% in the third quarter from 0.74% in the linked quarter¹.

The Future Outlook

Some bankers are not optimistic about a near-term bounce back in the trucking industry¹. Aaron Graft, the founder, Vice Chairman, President, and CEO of Triumph Financial Inc., wrote in a letter to shareholders that “things will have to get worse in trucking before they get better”¹.

Graft also expressed concern about the impact of the commercial real estate sector on the economy, which could further influence freight¹. He pointed out that private equity and venture capital firms have “artificially propped up” disruptive technology companies in the industry without achieving profitability¹.

Conclusion

The trucking credit crisis is a complex issue with far-reaching implications. As the industry continues to face challenges, it’s clear that the effects will be felt not just by the companies directly involved, but also by the banks and the broader economy¹

¹spglobl.com/marketintelligence/en/news-insights/latest-news-headlines/some-us-banks-face-credit-fallout-from-trucking-industry-slump-78316873