Syndicated loan bosses have become used to some fairly rough numbers in recent years. The European market has been hit hard by the financial crisis and corporate borrowers' consequent shift of their funding to bond markets.
A recovery was under way, but hopes of better profits for many lenders have been knocked sideways by Russian president Vladimir Putin's decision to annex Crimea and stir up unrest in eastern Ukraine.
This is disastrous news for some banks, as emerging markets are one of the more profitable parts of the European loan market, and for some firms, Russian clients are believed to have made up as much as 50% to 90% of that segment of lending.
It is natural that banks want to address the Russian lending impasse head-on, rather than sitting on capital and heavy staff costs and waiting while the market dies a slow death.
Some lenders had already been realising before the US and EU sanctions kicked in that their risk was too concentrated in Russia.
So banks are showing a fresh interest in seeking out new lending opportunities in Africa and the Middle East, as GlobalCapital has been observing for the past few months.
The Middle East is already saturated with bank lenders – including some very strong houses from the local region – and its buoyant tone has squeezed margins in recent years. This is, however, likely to encourage new and exciting borrowers amid a search for yield down the credit spectrum.
More promising to some than the Middle East is Africa, which has not had the international lending penetration of other regions. Economic growth rates are good by Western standards and many borrowers are first-timers, so fees could be lucrative.
But banks should not think Africa is the answer to all their problems. Throwing money at borrowers you don’t know very well is not a good way to spread risk. Relationships take a long time to nurture – in Russia it took a decade for banks to build the big-cheque syndicated loan market they have until recently enjoyed. No wonder those with a big stake in the game are loath to throw in their cards just yet.
Africa is not going to take 10 years to get going as a market – maybe just a couple. Banks have already started to make inroads there and deal flow is increasing. It is certainly an exciting prospect for the loan market, which needs new sources of growth and challenging new risks. But it is next year’s story at best, not - on a large scale - one for 2014.
Banks that want to succeed in Africa will take a sector-by-sector approach, playing to their own existing strengths and aiming to make the transition as seamless as possible. They will need to take time to understand the borrowers that fit their criteria and the underlying credit fundamentals and politics of the countries they operate in.
With all that done, lenders will have to coax new borrowers over the line for the first time and answer all the questions that established clients take as read. Anyone who already earns their crust in Africa will know that these are not going to be fast-moving negotiations. Banks are going to have to make long term commitments.
It is only right for banks to widen the search for lending opportunities. Living on tenterhooks for every day's events in Donetsk and Lugansk is not a happy place to be.
But the healthier stance this year would be to avoid a hasty flight from Russia that could have permanent consequences, keep Russia-focused staff in place and explore ways to get Russian deals ready in case conditions improve.
The big cheques are gone – at least in dollars – but a handful of European banks still insist that the Russian loan market is not completely shut. It might not be long before a few $300m to $500m deals start to re-emerge. The club of lenders is smaller and more nervous, but it still exists.
Given the recent history of banks being fined squillions for breaching sanctions, few want to be at the front of the queue going back into Russia – especially if they do a lot of banking business in the US.
But neither should any bank want to push to the front of the queue going out of it.