European banks offload Asian loans

UNDER PRESSURE from a spiralling debt crisis at home, Credit Agricole and other European banks are offloading more of the loans…

UNDER PRESSURE from a spiralling debt crisis at home, Credit Agricole and other European banks are offloading more of the loans they hold in Asia, squeezing up lending rates and making it tougher for small and mid-sized companies to borrow.

As French and other European-based banks seek to sell overseas assets to shore up their capital at home, they have increased the traffic in detailed loan documents, known as axe sheets, to other banks across Asia.

These sheets specify loans that a bank has previously handed to a company and now wants to sell on to another bank or trade in the secondary market.

Credit Agricole has listed 64 Asia loans worth $1.1 billion (€821 million), according to the French bank’s most recent axe sheet. The loans currently support such companies as India’s Bharti Airtel and Hong Kong’s Sun Hung Kai Properties.

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Two years ago, the bank was offering just eight loans worth $170 million in Asia, an axe sheet from that period shows.

“What you’re seeing is evidence of what one’s hearing: that the European banks are deleveraging and selling assets,” said Philip Cracknell, global head of syndications for Standard Chartered Bank.

While axe sheets are common, it is unusual to have so many Asia loans on sale at one time and to see how widely these sheets are being distributed, with banks offering deals to rivals they would normally want to keep out of the process.

HSBC, Europe’s biggest bank, is offering 17 corporate loans worth $370 million, extended to companies including Reliance Industries and Huawei International, according to another axe sheet.

These are a combination of HSBC loans and loans from other institutions, and not all are for selling but are instead for trading in the secondary market, said a source familiar with the matter.

HSBC and Credit Agricole declined to comment.

The Asia loan sell-down shows just how difficult it may be for Asian businesses to open new lines of credit now that a prominent group of lenders are pulling back.

European banks’ portion of syndicated loans in Asia excluding Japan fell to 16 per cent in the first half of this year. – (Reuters)