Chart of the day: The alarming fall in syndicated lending
The chart of the day comes from Thomson Reuters LPC, and shows total global volume of syndicated lending, on a quarterly basis, going back to 2003.
Syndicated lending is the big and boring part of the bank-loan market — the bit where huge corporations borrow so much money that they need to line up a consortium of banks to get the deal done. As you can see, in boom years syndicated lending can reach $1 trillion per quarter, so this is an enormous market. And as you can also see, very clearly, it seems to have fallen alarmingly this year — not the kind of thing you want to see in a global economy which is supposed to still be in the early stages of a recovery.
The big picture here is that in healthy years, the world does about $800 billion or more in syndicated lending per quarter; of that, somewhere north of $400 billion comes from the Americas. By that criterion, the global lending market has been healthy since the fourth quarter of 2010.
But it’s not any more. Total lending in the first quarter of 2012 was just $646 billion, down 20% from the first quarter of 2011, and down 29% from the previous quarter. The Americas also saw their lowest total since the third quarter of 2010, but there the really bad news is hidden elsewhere: a good 70% of total issuance in the Americas is refinancings, where companies roll over their existing debt. Just 30% of the total is represented by new money coming in to the market.
And if you think things are bad in the Americas, they’re much worse in Europe.
This all bodes ill for the global economy, as it’s a very clear sign that banks are putting the brakes on lending money to even their biggest and best corporate customers. And it also implies that the rebound in lending that we saw in 2010-2011 might have been a little bit artificial, comprising in large part a backlog of deals which simply couldn’t get done at the height of the financial crisis.
Now that the urgent refinancings are largely out of the way, banks are showing no real appetite to lend new money to anybody. They’re not lending here, and neither are they lending in the rest of the world. The quid pro quo of the global bank bailouts was always that in return for getting recapitalized, the banks would turn around and start lending again. That hasn’t happened. And insofar as it did happen, the era of revitalized bank lending already seems to have come to an end.