Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

JPMorgan Grabs Europe Loan Share as French Waver: Credit Markets

JPMorgan Grabs Europe Loan Share as French Waver
BNP Paribas lost its dominance in dollar-denominated loans this year, falling to No. 2 after being supplanted by New York-based JPMorgan, according to Bloomberg data. Photographer: Chris Ratcliffe/Bloomberg

U.S. banks led by JPMorgan Chase & Co. and Citigroup Inc. are boosting their share of loan underwriting in Europe to the highest since 2007 as French lenders’ dominance ebbs amid the region’s expanding debt crisis.

The Wall Street banks captured 10 percent of the $860 billion of loans arranged this year, up from 8 percent in 2010. BNP Paribas SA, Credit Agricole SA and Societe Generale SA have 15 percent of the market, the least since 2006 and down from 16.5 percent a year ago, according to data compiled by Bloomberg. BNP Paribas and Credit Agricole remain the top two lenders. Societe Generale slipped back to its No. 6 ranking of 2009.

“The trend of U.S. banks taking market share from the French banks has started and will probably continue as U.S. lenders are in a better situation now having addressed their problems from 2007 and 2008, whereas French banks are facing the need to adapt,” said Elisabeth Grandin, a director in Standard & Poor’s European financial services group in Paris.

Citigroup and JPMorgan were hired by Danone to help coordinate the biggest yogurt maker’s 2 billion-euro ($2.72 billion) credit line in July, according to Bloomberg data. BNP Paribas, Credit Agricole and Societe Generale were among the leaders of Danone’s last loan in December 2007.

Dollar Funding

French lenders are pulling back as the cost for European banks to fund in dollars increases. The cost to banks of converting euro payments into greenbacks as measured by three-month cross-currency swap dropped to 113 basis points below the euro interbank offered rate today, from 27.6 at the end of June.

“If the difficulty in getting dollar funding forces them to pull away from some deals, clearly this will be opportunities for others to step up,” said Ashu Khullar, London-based co-head of Europe, Middle East and Africa loan structuring and syndication at Citigroup. “European banks have been very active in trade, commodities and pre-export financings which tend to be largely based in dollars.”

Elsewhere in credit markets, Amgen Inc. and Peabody Energy Inc. led $38.2 billion of corporate bond sales this week, the most in more than five months, as economists lowering the odds of a U.S. recession overshadowed Europe’s debt crisis. Empresas ICA SAB, Mexico’s largest construction company, plans to sell more bonds linked to revenue from infrastructure projects.

Futures traders are scaling back bets for the speed at which the Federal Reserve will eventually lift its target rate for overnight loans as U.S. employers remain slow to add workers.

Amgen Offering

Amgen, the world’s largest biotechnology firm, issued $6 billion of debt in the biggest bond offering since March, according to data compiled by Bloomberg. St. Louis-based Peabody Energy, the U.S. coal producer, sold $3.1 billion of notes to finance its acquisition of MacArthur Coal Ltd., the data show.

Issuance climbed 38 percent from last week with borrowers from Israel’s Teva Pharmaceutical Industries Ltd. to Encana Corp., Canada’s biggest natural-gas producer, selling corporate debt as yields fell. Sales reached $20.7 billion on Nov. 7, the busiest day since May 27, after European Central Bank executive board member Juergen Stark predicted the region’s debt crisis will be under control within two years.

The U.S. economy will grow by 2.2 percent next year, according to the median forecast of 63 economists surveyed by Bloomberg. That’s up from 2.0 percent in last month’s poll. The chance of renewed recession fell to 25 percent from 30 percent, economists in the survey said.

ICA Bonds

ICA sold 7.1 billion pesos ($525 million) of securities on Sept. 29 that are backed by receivables from a contract to build and operate prisons for Mexico’s government. The bonds, which mature in 21 years, are rated AAA on a local scale by Standard & Poor’s. That’s 12 levels higher than ICA’s own BB- rating by the credit-rating service.

ICA may use a similar structure to sell debt for water-treatment plants because it offers “pretty good terms,” Chief Operating Officer Alonso Quintana said Nov. 9 in an interview in Mexico City.

Implied yields on Eurodollar futures that expire in December 2014 have slid 45 basis points, or 0.45 percentage point, since Oct. 12 as traders price-in a slower pace of Fed monetary policy tightening. The Fed has held its target rate for overnight loans in a zero to 0.25 percent range since December 2008 and pledged in August to hold its key rate steady at least mid-2013.

Fed Chairman Ben S. Bernanke said this month the pace of growth remains “frustratingly slow” though concern dimmed that the U.S. economy risks sliding into another recession.

Europe Ratings

Eurodollar contracts, the world’s most actively traded futures, are based on predictions for the three-month dollar London interbank offered rate, or Libor, and are used to speculate on changes in central-bank policy.

The European Commission may scale back plans to require periodic changes in the firms that rate a company’s credit on concerns there aren’t enough of them for the proposal to work, said a person familiar with the matter.

The commission, the 27-nation EU’s executive arm, had considered requiring companies to change the ratings firm they use every three years to ensure that assessments remain impartial, with a four-year period before a firm can be rehired. The measure may now be scaled back, including a possible extension of the three-year deadline for companies that hire multiple ratings firms, said the person, who couldn’t be named because the discussions are private.

Barclays’ High-Yield Forecast

Barclays is forecasting that speculative-grade borrowers will sell in 2012 between $180 billion and $200 billion of junk bonds and $150 billion to $175 billion of leveraged loans.

“While we expect primary markets to be open in 2012, the pace of issuance should be somewhat slower than in 2010 and 2011, as the low all-in yield environment of early 2011 pulled forward some refinancing activity that otherwise may have occurred next year,” credit strategists led by Bradley Rogoff said yesterday in the report.

From January through July of this year, companies sold $184.6 billion in notes, a 50 percent increase from 2010, according to Barclays.

The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index fell for the second straight session yesterday, declining 0.03 cent to 91.9 cents on the dollar. The measure, which tracks the 100 largest dollar-denominated first-lien leveraged loans, has climbed from 86.96 on Oct. 5, which was the lowest since December 2009.

Loan Ratings

Leveraged loans and high-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P.

In emerging markets, relative yields rose 3 basis points to 395 basis points, or 3.95 percentage points, according to JPMorgan’s EMBI Global index. The measure has ranged from 259 on Jan. 5 to 496 on Oct. 4.

Corporate borrowers in Europe refinanced a record $454 billion of loans this year, up 52 percent from a year earlier, to benefit from lower borrowing costs in the first half of 2011, according to Bloomberg data.

Interest margins have increased since July, with the average paid by investment-grade borrowers in Europe at 91.6 basis points more than benchmark rates, up from 84.4 basis points during the first six months of 2011. The interest margin for leveraged buyouts increased to 434 basis points from 419.8, the data show.

Capital Constraints

“Banks that are less affected by dollar funding problems and balance sheet reductions are unlikely to start pricing very aggressively because everyone has capital constraints,” said Jon Abando, executive director of EMEA loan capital markets at JPMorgan in London. “If some banks are priced out of deals then borrowers have a reduced number of banks which can participate in a transaction.”

U.S. lenders are closing in on France’s two biggest banks after their share of the market tumbled to as low as 5.8 percent following the collapse of Lehman Brothers Holdings Inc. in 2008.

In 2000, U.S. firms held 28 percent of the market, according to Bloomberg data. Tighter regulations and the sovereign debt crisis will lead the two biggest French lenders to cut at least 300 billion euros from their balance sheets by 2013.

BNP Paribas and Societe Generale announced their plans to scale back in September. Rather than tap the market for capital, the two lenders are seeking to free up a combined 10 billion euros through asset cuts and disposals.

Lost Dominance

BNP Paribas lost its dominance in dollar-denominated loans this year, falling to No. 2 after being supplanted by New York-based JPMorgan, according to Bloomberg data. Paris-based BNP Paribas, which helped arrange a $2.5 billion credit line in April for SABMiller Plc, was absent from the brewer’s $12.5 billion loan from August to take over Foster’s Group Ltd.

Ashling Cashmore, a spokeswoman for BNP Paribas in London, declined to comment, as did Charline Coue, a spokeswoman for Credit Agricole and a spokesman in London for Societe Generale.

“We are aware of the short-term funding issues some European banks are facing, which has made them less willing to lend, especially in dollars,” Jan-Maarten Mulder, the global head of corporate finance and treasury at Amsterdam-based Trafigura Beheer BV, said in an interview. “There is relatively more pressure on French banks recently.”

Trafigura, the third-largest independent oil trader, may switch some of its dollar funding into euros and seek more letters of credit which have no capital requirements for lenders, Mulder said. The firm has sought to diversify into the U.S. and Asian market.

New Entrants

“We are seeing some U.S. banks like Citigroup move into our industry as they try to” bolster their franchise, Mulder said. “We welcome new entrants into the market but even though some traditional trade finance banks are going through difficult times, they will remain dominant lenders.”

Dollar-denominated deals account for 27 percent of the market this year compared with 33 percent last year, Bloomberg data show.

Citigroup is one of the managers of a $870 million term loan last month to OAO Gazprom Neft, the oil producer controlled by Russia’s natural-gas export monopoly, which didn’t have a U.S. bank arranging its $1.5 billion pre-export financing last year, according to Bloomberg data.

“In light of the market dislocation, there will be a reshuffling of league table rankings in the next couple of years as European banks try to identify who their key clients are and rationalize their lending,” said Citigroup’s Khullar. “We’ve been proactive in providing capital to our key clients in the past 18 months after we addressed our issues from the last crisis.”

Balance Sheet

BNP Paribas is shrinking its balance sheet after total assets jumped 34 percent to 2.24 trillion euros in the three years to June 2010, equal to the size of Bank of America Corp. and Morgan Stanley combined. Total assets fell to 1.93 trillion euros in June, about the same size as France’s economy.

French financial firms top the list of Greek creditors with about $57 billion in overall exposure to private and public debt at the end of March, according to the Bank for International Settlements based in Basel, Switzerland.

JPMorgan hired David Shaw from Barclays Capital in June for the EMEA acquisition and leveraged finance group. Simon Rankin, joined from Deutsche Bank to help run the newly formed emerging market team within the group, according to Kate Haywood, a London-based spokeswoman for JPMorgan.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.