Banks managing loans in Asia Pacific have clearly seen better days. The last year was undeniably difficult: dollar, euro and yen deal volumes in Asia ex-Japan fell to $98.1bn, down 26% from the year before. And 2013 has certainly not had the frenetic start that is needed to convince bank strategists that the market is turning around.
But there are still reasons to be cheerful, especially when things are put into perspective against a dire 2012. It seems likely that loans bankers will continue to lose business to a bond market that is proving mouth-wateringly tempting for many Asian borrowers. But they can — and will — increase their chances of bringing some of that business back.
The direction of pricing, for one thing, seems destined to favour Asian loans bankers this year. It has already dropped, falling in the second half of 2012 from the lofty heights of the first six months of that year. This has already helped bankers stem the fall in volumes — the fourth quarter was an improvement over the previous three months — and it will help them even more if pricing keeps moving down.
There is also a natural source of volumes coming up for Asian loans bankers. The market will get a fillip from the refinancing needs of borrowers that have loans falling due this year — and there are plenty of those. Borrowers in Asia ex-Japan have more than $72bn of dollar, euro and yen loans maturing over the course of this year, according to Dealogic. That is a lot of business that could end up back in the pockets of reliable lenders.
It has been a quiet start to the year, certainly, but loans always take a while to get going; that is the nature of the beast. Many bankers are optimistic that once Chinese New Year — which falls on February 10 — is out of the way, they will be able to bring plenty more deals. The holiday is a good excuse for those bankers that are not busy at the moment, but it is also a good landmark for lenders that are champing at the bit to pick up the pace.
That does not just apply to Asian banks. Even those European lenders that took a step back from the market in the first half of last year have largely returned, coming back to the region with a renewed appetite for Asian risk. That is yet another factor that could be a big help in bringing volumes in the region up from last year.
Nonetheless, the situation is not ideal. Demand for syndicated loans from borrowers in Asia is still low, and the bond market remains (frustratingly) busy. But confidence is rising, lenders are hungry, and pricing is going in the right direction. This may not be the year of loans — but it looks sure to be the year of loans improving.