Swedish Corporate Bond Market Grows As Bank Credit Tightens
April 12 2012 - 11:30PM
Dow Jones News
Swedish companies are increasingly turning to the bond market
for financing as access to bank credit has tightened since the
autumn in the wake of the euro-zone debt crisis and tough new
financial regulation, Danish bank Danske Bank A/S (DANSKE.KO) said
Friday.
Compared with the crisis-struck euro zone, companies in Sweden
still have decent access to bank funding, but it has become harder
for smaller firms and capital intensive businesses such as property
groups to get loans, Danske Bank's head of credit analysis in
Sweden, Louis Landeman, told Dow Jones Newswires.
"We have seen a clear contraction since the autumn," Landeman
said, but added that "during this period there has been an extreme
credit contraction in Europe, and in the light of that, the
situation in Sweden still looks relatively sound."
Danske Bank's "Credit Barometer" index fell to 57 in its latest
twice-yearly study of Swedish credit conditions, conducted in March
this year, compared with 68 in September, indicating a tougher
funding climate, the bank said.
Stricter financial regulation such as the international Basel
III capital requirements, which have been rolled out in the wake of
the recent crisis to make the financial industry less risky, have
forced banks to trim their loan portfolios, it added.
Capital intensive firms are increasingly raising their funds
directly through the financial markets, Danske Bank said, noting
that Swedish property companies issued 4.8 billion kronor ($711
million) of corporate bonds in the first quarter this year compared
with SEK2.3 billion a year earlier.
This development mirrors the trends elsewhere in Europe.
European companies have traditionally relied on bank financing, but
during the first quarter borrowed more from the bond market than
they did from banks, according to data provider Dealogic.
In Sweden, corporate bonds currently make up somewhere around
20% of the companies' financing, but in the long run that figure is
likely to move towards the levels seen in the U.S. and recently on
the European continent, Landeman said.
Companies such as real-estate group Klovern AB (KLOV.SK) and
wind power firm Arise Windpower AB (AWP.SK) have recently entered
the bond market with new issues, and the number is set to grow as
banks' lending will remain restricted by tough new regulation, he
added.
Because of the volatility on stock markets and low yields on
government bonds, the demand for corporate bonds is also on the
rise, said Landeman.
It will take time for Swedish corporate bond volumes to develop
as the investor base needs to grow and institutional investors will
have to build up capacity and analysis resources for the segment,
he said, but added that the corporate bond market is attracting
growing attention from investors.
"People are starting to realize that this exists, and then
demand goes up. We see that happening a lot right now," he
added.
-By Gustav Sandstrom, Dow Jones Newswires; +46-8-5451-3099;
gustav.sandstrom@dowjones.com