June 9, 2014
Pricing in favored tenors for financial institutions is better in the loan market, funding officials at Banco Itaú and Bladex say
“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 particular case.”
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. Compartamos,Banco Ripley, 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
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