U.S. Capital Markets Glide Path to Clearer Skies

Must pass other macroeconomic milestones first The credit-flow story extends to all types of businesses (not just the CRE sector)

Net Percent of Banks Tightening Standards (%)

• Approximately 1-2 quarters ahead of a

100%

Banks Curb Lending

Banks Curb Lending

Banks Curb Lending

recession, >40% banks report tightening lending standards.

Banks Curb Lending

80%

60%

• As standards tighten, business, consumer and investor sentiment typically falters as well. • Banks and other lenders typically begin loosening credit standards towards the end of a recession. • In the current downcycle,

40%

20%

0%

-20%

-40%

pencil in a gradual thawing in the credit

markets (both the business and CRE sectors) to start H1 2024.

Jun-91

Jun-94

Jun-97

Jun-00

Jun-03

Jun-06

Jun-09

Jun-12

Jun-15

Sep-17 CRE loans Jun-18

Jun-21

Mar-92

Mar-95

Mar-98

Mar-01

Mar-04

Mar-07

Mar-10

Mar-13

Mar-16

Mar-19

Mar-22

Dec-92

Dec-95

Dec-98

Dec-01

Dec-04

Dec-07

Dec-10

Dec-13

Dec-16

Dec-19

Dec-22

Sep-90

Sep-93

Sep-96

Sep-99

Sep-02

Sep-05

Sep-08

Sep-11

Sep-14

Sep-20

C&I loans - To large and middle-market firms

C&I loans - To small firms

47

Source: Federal Reserve Senior Loan Officer Opinion Survey (SLOOS)