Credit Supply Outstrips Demand for US Fortune 500
A weaker than expected economic recovery and historically favourable conditions in corporate bond markets are moderating demand for bank credit among Fortune 500 companies. With major banks starting to compete aggressively to make loans to these creditworthy borrowers, the largest US companies find themselves in an enviable position in terms of funding.
Every year, Greenwich Associates asks the Fortune 500 companies participating in the firm’s US Large Corporate Banking Research Study to name the banks they use for credit and other banking services, and to rate these providers according to a series of detailed criteria. In 2009, on average only 23% of the customers of the top 10 corporate banks in the United States gave these banks an “excellent” rating in terms of “willingness to extend credit in amounts and at terms that meet expectations.” In 2010 that share proportion jumped to 43%, with another 37% ranking their banks as “above average” in this category. (See figure 1) Client ratings improved along similar lines in the categories of banks’ “commitment to long-term, sustainable relationships,” and to companies’ overall levels of satisfaction with their current providers. (See figure 2)
“In the Fortune 500, 77% of companies that use one of the top 10 corporate banks in the United States rate their overall level of satisfaction with that bank as ‘excellent’ or ‘above average’,” says Greenwich Associates consultant Don Raftery. “That is a far cry from the state of play in the middle market or with small businesses, where companies’ inability to secure essential financing from their banks has fractured many long-standing relationships.”
Companies have been able to pay down credit lines tapped during the worst months of the global crisis.
US Fortune 500 companies also report significant improvement in their ability to access various types of bank credit products over the past few months. Twenty-eight per cent of these companies say their access to bank revolving credit facilities has either “increased” or “increased significantly” over the past three months. Only 4% say their access has diminished. Both are in stark contrast to the same time last year when 40% cited decreased access and only 8% an increase. The story is much the same for bank term loans, which a quarter of Fortune 500 companies say have become easier to secure over the past three months, with only 4% saying their access has decreased. Twenty per cent of the companies say their access to bank structured finance has improved, versus only 2% reporting deterioration in conditions. (See figure 3)