Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Banks Not Lending? Corporate Borrowing Soars in 2011


Consumers may be cutting debt and banks may be tightening up their balance sheets, but borrowing by U.S. corporations is in full swing.

At a time when the popular narrative centers on how tight-fisted banks are getting with their lending, end-of-year data for syndicated loans tell a different story.

Corporations use syndicated loans for longer-term financing. The loans usually are provided by a group of deep-pocketed lenders who can distribute liability among them and thus decrease their risk. Big Wall Street investment banks are usually the source of such loans.

So far in 2011, syndicated loan volume has increased a whopping 56 percent compared to 2010, according to Dealogic. The total of $1.76 trillion is the highest single-year sum since the pre-financial crisis days of 2007.

This came even though fourth-quarter activity saw a pretty big tail – the $354.5 billion total was the lowest in more than a year, since the $246.6 billion in the third quarter of 2010, Dealogic said.

Moreover, the U.S. was the biggest player in the space, with 47 percent of the total global loan volume, up 9 percentage points over 2010.

The bulk of the loans went to the most credit-worthy.

Investment grade volume increased to $1.03 trillion, also the highest since 2007, representing a 68 percent year-over-year gain.

Globally, syndicated loan volume grew 27 percent to $3.74 trillion – again, the highest since 2007, Dealogic said.

All this growth in volume helps big Wall Street names who can get in on the action.

JPMorgan Chase and Bank of America Merrill Lynch were the two biggest players. JPMorgan led the total bookrunning, with 11.2 percent of the market share, while BofA had the most revenue from syndicated loans at $1.8 billion, compared to JPMorgan’s $1.6 billion.

The spike in corporate borrowing, though, contrasts with the debt-averse private sector.

Consumer credit grew at a 3.7 percent pace in October but is up just about 2 percent for the year, with total consumer debt outstanding at $2.46 trillion, according to the latest seasonally adjusted Federal Reserve data.

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