High Yield and Loan Strategy Q2 earnings AI Winners Extend Their Lead

High Yield & Loan Strategy Q2 earnings: AI Winners Extend Their Lead

Stable earnings, but selectivity matters 20 August 2026

LevFin earnings continued to improve in Q2, with YoY HY revenue growth increasing to High Yield & Loan Strategy 7.5% and Loans to 8.6%, and adjusted EBITDA growth increasing to ~9% for both. The United States momentum is expected to extend into Q3 with our estimates sitting at ~10% YoY revenue growth and 9% EBITDA growth across LevFin, supported by strong small-cap Table of Contents trends and good financial conditions, despite some pressure from higher real rates and Investor takeaways 2 rising distress levels. That said, dispersion remains high and fundamentals are falling Q2 Earnings – Steady performance across HY & into a K-shape beneath the index hood. 2 Loans

AI exposure is creating a Credit-K AI weekly pulse 10 Market Recap: USD HY 14 AI exposure continues to drive credit fundamentals. HY issuers levered positively to AI delivered revenue and EBITDA growth of 15-16%, while the cohort exposed negatively Market Recap: USD Loans 23

saw growth of only ~4%, representing a sequential slowdown. Loans show an even Market Recap: EUR Loans 29

sharper split, with AI beneficiaries posting 27% revenue growth vs 3.6% for at AI-risk Glossary 30 credits. The rest of index (AI-agnostic) grew its earnings at just 5-7%, underscoring the increasingly important role AI is playing in LevFin. Neha Khoda Credit Strategist LevFin credit is lagging large-caps in AI monetization BofAS LevFin is participating in the AI trade, but the quantified benefits remain far less widespread than in large-cap equities. In Q2, AI beneficiaries (companies disclosing Elizabeth M. Han measurable growth, productivity gains, or operational efficiencies, directly attributed to Credit Strategist BofAS AI) accounted for 31% of the S&P 500 universe versus 18% of LevFin, with the gap especially visible in Energy and Capital Goods. In addition, AI monetization remains Dong Ba concentrated closer to the infrastructure build-out, with the benefits yet to broaden Credit Strategist BofAS materially across downstream users. Adam Vogel NEW- AI Weekly Pulse Credit Strategist BofAS We introduce a new section that will track AI-related issuance, deals, spreads, and other AI-related data on a weekly basis. Credit markets have seen $335bn of AI issuance YTD, led by $255bn in IG and $40bn in HY, with Loans & Direct Lending contributing $20bn each. IG AI spreads are currently 119bps after retracing from Jul 29th wides of 130bps, now 46bps wider vs. comparable ex-AI. HY AI spreads are now 320bps, after reaching new wides of 327bps earlier this week, leaving 147bps premium vs. ex-AI.

HY and Loan Weekly Recap HY spreads were broadly unchanged WoW at 273bps, though CCCs widened 10bps. The index returned 0.1%, lifting MTD returns to 0.9%, with BBs (+0.9%) outperforming CCCs (+0.5%). Issuance totaled $1.7bn WTD and $12.1bn MTD, led by refis (54%) and AI Capex (19%). Fund flows were flat following $0.1bn outflows last week, while internal demand reached $10.8bn and is expected to moderate to $4.5bn next week. Loans returned 0.08% WTD as carry offset a 0.01pt price decline, with CCCs lagging at -0.4%. $3.5bn in demand drove stronger technicals amid a softer primary ($0.7bn issued WTD). No defaults were recorded, leaving LTM loan default rate at 1.9% by par.

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Investor takeaways • Q2 fundamentals strengthened across HY and Loans. HY YoY revenue growth improved to 7.5% (from 6%) and adjusted EBITDA growth to 9% (from 8.3%). Loans posted revenue growth at 8.6% (vs. 7.6% in Q1) and adjusted Ebitda growth at 9.5% (vs. 9.2% in Q1).

• LevFin is expected to sustain solid Q3 momentum, with 9.5% and 10.5% YoY revenue growth for HY and Loans respectively, and 10% adjusted EBITDA growth in both HY and Loans. The…