Banks are taking an optimistic approach toward the level of demand for new loans at the top end of town in 2011 and 2012 after a subdued year so far in 2010.A range of corporate bankers and private equity managers speaking at an industry conference in Melbourne yesterday highlighted the improved pricing, extended terms and widening pool of bank investors, especially from Asia, available to Australian corporate borrowers.Syndicated lending linked to the Australian capital market in the period to mid September 2010, which provides one measure of loan demand this year, was US$45 billion. The bank market financed US$121 billion in loans in 2007, a level unlikely to be exceeded for some years.Brad Upton, director at Westpac Institutional Bank, estimated refinancing demand from Australian corporates in 2011 at US$35 billion. He estimated demand in 2012 at US$40 billion.The need to refinance various credit wrapped, or insured, loans due for maturity pushes these estimates even higher.Upton listed five main drivers of increased demand over the next two years. These included an anticipated revival in demand for funds from businesses pursuing takeovers, borrowers seeking to refinance early to lock in funding and stave off any 2009 style hesitation on the part of banks to provide funding (and itself a form of insurance against a return of stressed conditions in capital markets).He also said more banks were willing to participate in transactions led by other banks and to be part of wider bank groups at an early stage of a borrower's search for funding options.Upton said a strong theme over the last three to six months was in the field of leveraged and acquisition finance, and highlighted the support by large bank groups for the private equity bids for Study Group and Healthscope as examples of the improving climate for lenders and borrowers."There is significant capacity to underwrite at present," he said. "The supply of loan capital at the moment is greater than demand at the present time."But appetite has improved and I expect that momentum to last over the next 12 months."Sean Joseph, executive director, syndications, at ANZ pointed to the increasing demand to invest in loans by Australian borrowers from banks in Asia, and the search for what he called "relative yield", compared with the yields available from lending to corporate borrowers in their home markets.Terms for borrowers seeking to draw Asian banks as investors in loans have improved over 2010, Joseph said, with more flexibility around meeting the terms that the borrowers want, as with a landmark loan for Origin Energy earlier this year, which Origin was able to market in Australian dollars.Upton and Joseph were speaking at the Banking and Finance Conference hosted by the Australian Centre for Financial Studies and the Financial Services Institute of Australia.