Societe Generale Germany country head Guido Zoeller
FRANKFURT/LONDON/PARIS: US investment banks are shrinking lending activity in Europe as the coronavirus crisis forces them to retreat home, allowing BNP Paribas and other European lenders to fill the funding gaps and grab market share, seven sources told Reuters.
Facing unprecedented demand for loans, and under pressure to support their local economy, the likes of Bank of America and JPMorgan have taken a more cautious approach on Europe, the sources said, speaking on condition of anonymity.
Goldman Sachs, Morgan Stanley and Citigroup have also become more risk-averse in taking lending decisions in Europe as they fret over a wave of potential loan defaults, the sources added.
With US banks focusing on their home turf, France’s BNP Paribas is using its robust balance sheet to gain market share by increasing lending across the continent, according to the sources and Refinitiv data.
Bank of America, JPMorgan, Goldman Sachs, Morgan Stanley, Citigroup and BNP Paribas all declined to comment.
The US banks remain active on selective deals, however, with Goldman Sachs and Citigroup underwriting a €3.5bn euro credit facility for Fiat Chrysler in March.
They are also deploying different financing tools - such as issuing bonds as well as providing bridge capital or bilateral loans - to spread their bets in Europe.
Sources at the banks say that their European rivals can afford to be more aggressive in their capital allocation as they can access ultra cheap financing from the European Central Bank.
The retreat of Wall Street’s giants nonetheless follows a lending bonanza of several years, with US lenders consistently dominating European investment banking league tables since the financial crisis in 2008, Refinitiv data shows.
“US banks are right now more concerned with their domestic commercial and retail banking activities, so they are taking a more careful approach to Europe,” said Societe Generale Germany country head Guido Zoeller.
Bank of America, for example, turned down requests by British events organiser Informa in March to underwrite a new €750m ($926.5m) credit line, according to one source with direct knowledge of the matter, despite being its joint corporate broker.
BNP Paribas, HSBC and Spain’s Banco Santander decided instead to take on the job and underwrite the facility, while Goldman Sachs and Morgan Stanley agreed to syndicate the debt.
Bank of America subsequently failed to land a key role in handling Informa’s share sale on April 16 which raised €1bn and was led by Goldman Sachs and Morgan Stanley as joint global coordinators, the source said.
Informa did not respond to a request for comment.
A source close to Bank of America said the bank had committed more than $9bn to European clients for liquidity back-up facilities since March 1. BNP Paribas, under CEO Jean-Laurent Bonnafé, leads both Refinitiv and Dealogic’s league tables for syndicated loan bookrunners in Europe, with Dealogic data showing it has underwritten $32bn worth of loans so far this year.
Despite oil market turmoil, BNP Paribas solely underwrote a $10bn credit facility for Britain’s BP on April 6. It is unusual for one bank to underwrite such a large facility alone, particularly in a sector under strain. French lenders Societe Generale and Credit Agricole, along with Santander and Italy’s UniCredit, have also moved to fill the lending gap, Refinitiv data shows.
While facing pressure to provide much-needed financing to domestic businesses, French banks have the backing of the country’s political establishment to expand overseas.
