BNP to bring Asia into its Aussie syndicated loans equation

Bernard Kellerman
Wayne Green, whose appointment as BNP Paribas' Hong Kong based head of loan syndicate and sales for Asia was announced this week, sees a segment of the banking market that is continuing in very much a "business as usual" fashion.

Starting his analysis closer to home, Green observed that the Australian loan market was "bubbling along very nicely".

"It's always been one of the core markets to Asia Pac. In most years it's also been one of the larger markets outside of Japan, and it's been very consistent. The market is very well developed - we have a strong economy and legal system," he said.

With the global financial crisis, and later the European banks' own home grown problems, most European banks quit the Australian market only to be quickly replaced by Asian banks. "The top three Japanese banks are probably sitting between numbers six and ten in the league tables," Green said.

Green concedes, however, that the Big Four Australian  banks will maintain their market dominance. "That's understandable. It's a home market with big demand," he said.

Another factor holding back overseas banks from challenging the Big Four is the shortage of big M&A deals that could push participants quickly up league tables. Green also noted that, under Basel III rules, BNP has pushed its tier 1 ratio above ten per cent and has a liquidity ratio well in excess of what is required - in other words, the bank is setting itself up to boost activity, where required, although using its balance sheet "sparingly, for the right transactions."

In recent times BNP has been involved in some of Australia's biggest ticket deals, which have kept the loans transaction volume up, but as Green puts it, "there's not been a lot of new stuff."

Here are the major syndicated loans that BNP Paribas has been involved in the past  year:

•    US$7.8 billion for the Roy Hill iron ore mine in Western Australia,  
•    US$2.8 billion for Scentre,  
•    $700 million for Brambles,  
•    â‚¬700 million for Sydney airport,
•    â‚¬350 million / A$500 million for Melbourne Airport,  
•    â‚¬600 million for Wesfarmers; and
•    A$473 million for Sirius Resources.

According to Green, what comes first in a funding strategy for a large corporate client is a loan to get the deal quickly into place and further down the track, if it works for the client, fixed income or equity issuance strategies are executed.

For BNP Paribas, the strategy for its Asian loan business will be more about growth than volume. And to achieve this, while on the way contributing to the Bank's regional ambitions to increase Asia Pacific revenues to over EUR 3 bn by 2016, Green will be seeking deals to take clients into the region from Australia or from Asian investors inbound to Australia, especially in the energy and resources sectors, which is where Green insists his bank has deep experience.

The group also has work to do to improve its asset based financing business, such as ships and aircraft.

Green further observed that his corporate clients were "becoming cleverer" and better informed as to what their options are, and "know what they want, what's best suited to them - clearly because they have probably had four or five different opinions or offers coming their way."

But one thing that Green, who was chair of the Asia Pacific Loan Market Association for four years, said had not changed in many years is the underdevelopment of a secondary loan market in Australia.

He believes this is due to the fact that Australian banks in particular have so much spare liquidity on their balance sheet they have no need to trade their loans.