CFOs more optimistic but keeping a tight rein on the balance sheet

Chief financial officers trimmed back their borrowing intentions during the June quarter, despite reporting a higher level of confidence about the economic outlook.

According to the latest Deloitte CFO Survey, 31 per cent of the CFOs of large listed companies said they aimed to increase their gearing over the coming 12 months, compared with 38 per cent in the March quarter.

Forty-four per cent said they did not plan to change their gearing (up from 40 per cent in March), while 22 per cent said they would reduce it and two per cent said they would reduce it significantly.

Asked about their preferred form of finance, 89 per cent of CFOs said bank borrowing was somewhat attractive or very attractive, 74 per cent said corporate debt (debt capital market issuance) was somewhat attractive or very attractive, 60 per cent said internal funding was somewhat attractive or very attractive and 53 per cent said equity issuance was somewhat attractive or very attractive.

Deloitte partner Stephen Gustafson said: "Credit remains both cheap and affordable in the eyes of CFOs and following a considerable jump in gearing intentions last quarter that indicator remains solid, although it dipped slightly."

Gustafson said that, overall, low interest rates and a weaker Australian dollar had contributed to a higher level of optimism among survey participants.

CFOs said they were neutral about this year's Australian Government Budget, compared with the strongly negative response to last year's Budget. Problems with Greek debt and the Chinese equity market did not have a big impact on CFOs' outlook.

A more positive outlook has not changed CFOs' risk appetite, however. Fifty-six per cent said it was not a good time to take greater risk on their balance sheets, compared with 49 per cent in March.