Loan market best for funding, say bank borrowers
Pricing in favored tenors for financial institutions is better in the loan market, funding officials at Banco Itaú and Bladex say
Syndicated loans offer a better cost of funds for banks than
tapping the debt market, officials have said.
|| Source: Thomas Hobbs
"Right now, in our case the sweet spot is between three
and five years and in those tenors the loan market prices
have been better than what we can get in the debt capital
markets," Carolina Camargo, head of international financial
institutions at Banco Itaú, said last week.
The bank recently found strong enough interest for a $1bn
syndicated loan that
it was said to be considering increasing the size of the deal
by as much as 50%.
For Central American trade finance lender Bladex, the
situation is similar. The trade-off between cost-effective
funding and tenors long enough to meet rules on stability of
funding made borrowing at three to five year tenors optimal,
Eduardo Vivone, Bladex’s treasurer said.
"I really agree 100% that the loan
market in this respect for several reasons has been providing
more competitive funding than the debt capital
markets....When you have seen some players perhaps
withdrawing or being less enthusiastic, you have seen other
players coming in."
As Asian banks became "less aggressive" in syndicated
lending, European banks picked up the slack, said Vivone.
"One of the lessons of the crisis was
that traditional funding partners from the past
won’t necessarily be the funding partners of the
future. [Syndicated loans are] a very good tool to diversify
your funding base– it’s a very good
door to open new relationships. This is also another very
appreciated, value-add that we find in the loan market in our
The loan market was still a "complement"
rather than a substitution to bonds, though, which offered
other opportunities — such as currency arbitrage,
tailor-made private placements, and recognition from a
broader range of investors in public deals, he said.
GlobalBank, and even
Itaú’s Chilean subsidiary are among
banks which have recently tapped the bond market.
Camargo and Vivone spoke at
LatinFinance’s Bank Finance conference
held in New York last week. LF
See also: Syndicated Loans - At any price