JPMorgan tops banks for third year as loans retreat

‘Key Event’

“A key event in 2012 was the return to stability of funding to the commodity finance market, even if the overall financing market volumes are down due to the pullback in metals prices and slower global economic growth,” said Federico Turegano, the global head of natural resources and energy finance at Societe Generale in Paris. “The big question for 2013 will be how fast the Asian markets return to purchasing commodities, particularly China on the metals side.”

China is the biggest consumer of everything from copper to cotton to coal and it probably returned to faster economic growth in the final three months of 2012, having slowed for seven consecutive quarters, the mean of 35 economist estimates compiled by Bloomberg show. Chinese banks probably will lend more this year, with a focus on financing the nation’s commodity cargoes, said Simon Tyler, the head of corporate banking at China Construction Bank Ltd. in London.

“The Chinese banks are starting to compete more in the loans space,” he said. “This year there will be much more. We are expanding from a relatively low base, so we are not going to be a major player yet but we will be doing a lot more.”

Any return of funding won’t be fully reflected in syndicated loans, said Turegano of Societe Generale. “A huge part of the commodity finance business is done on an uncommitted bilateral basis, therefore undisclosed.”

Higher Prices

Lending may increase this year should commodity costs rebound. A Bloomberg survey of 131 analysts, traders and investors last month predicted higher prices across industrial and precious metals and agriculture. Brent crude will trade above $100 a barrel for a third consecutive year, according to the median of 30 estimates compiled in December. It traded at $111.09 a barrel today.

“The world needs commodities,” said David Basra, the head of debt financing for Europe, the Middle East and Africa at Citigroup in London. “We have a growing global population, we have growth in the emerging markets and that all puts demand on natural resources. The requirement for liquidity and funding remains high.”

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