GREENWICH

ASSOCIATES

G R E E N W I C H

R E P O R T

Asian Large Corporate Banking

March 2012

Asian Corporate Credit Conditions: Clouds on the Horizon?

Asian companies have taken advantage of a prolonged
run of strong credit conditions to diversify funding bases
by supplementing bank loans with capital markets issues
and other sources of funds. Although the credit environment remained favorable across the region last year, new
data from Greenwich Associates suggests that, for some
companies at least, conditions are no longer improving.
On average, Asian companies enjoyed easy access to
bank credit and funding from other sources last year.
Approximately three-quarters of the large companies
participating in the Greenwich Associates 2011 Asian
Large Corporate Banking Study said they had no difficulty
securing bank credit last year, with another 15% reporting only minor difficulty. Those shares were essentially
unchanged from 2010. An additional 71% of companies
said they had no trouble accessing funds through the
commercial paper market. While that share certainly
reflects a favorable credit environment, it was down
significantly from the 78% of companies reporting no
difficulties accessing funds through the commercial paper
market in 2010.
One-third of large Asian companies say their access to
funding of all types for ongoing operations improved
in 2011 and 31% reported improved access to funding
for capital expenditures. But as in the case of access to
commercial paper markets, there are signs here that

Study Participants
From September to November of 2011, Greenwich Associates
conducted 552 interviews in large corporate banking and 148 in
debt capital markets with financial officers (e.g., CFOs, finance
directors and treasurers) at companies in China, Hong Kong, India,
Indonesia, Malaysia, the Philippines, Singapore, South Korea,
Taiwan, Thailand, and Vietnam.

credit conditions have begun to moderate. In 2010 only

23% of large Asian companies reported deterioration
in their ability to access funds for ongoing operations
or CAPEX. In 2011 that share increased to 89%. At the
same time, the share of companies reporting improvement in these measures actually declined. In 2010 46%
of companies said their ability to access funding for
ongoing operations had improved the year before and
43% of companies reported improved access to CAPEX
funding.
The most dramatic and perhaps ominous changes
in conditions were reported by companies in China and
Hong Kong/Macau where Chinese banks tightened
lending significantly over the course of 2011 as a result
of government policies to reign in the countrys fast
credit growth. In China the share of companies reporting improved access to funding for ongoing operations
dropped to 23% in 2011 from 44% in 2010 while the

Ability to Access Funding

By Type
1%
2011

8%

2010

9%

15%

76%

Bank credit
14%

76%

1%
2011

10%

6%

14%

71%

Commercial paper financing

11%

2010

10%

78%

1%
1%
Bond markets

10%

6%

2011

13%

10%

2010

3%

2011

1% 2%
4%

71%

16%

70%

16%

78%

Hedging products
2010

9%
1%
2%
2011
3%
10%

13%

78%

22%

62%

Equity financing
2010

4%
Very difficult

13%

16%
Difficult

63%
Average difficulty

Minor difficulty

Not at all difficult

Note: May not total 100% due to rounding. Based on responses from 148 financial officers in Asia in 2011 and 133 in 2010. Source: 2011 Asian Debt Capital Markets Study

2012 GREENWICH ASSOCIATES

GREENWICH REPORT CONFIDENTIAL

Public Bond Issuance by Asian Companies

Access to Funding
Asia

Europe

Ongoing operations

8%

33%

15%

9%

Asian bonds

Capital expenditures

9%

31%

16%

8%

U.S. dollar bonds

Hedging products

11%

24%

10%

57%
61%
31%
34%

9%

13%
14%

Asset-backed securities

Structured finance

10%

24%

17%

5%

11%
11%

Euro currency bonds

Acquisition finance

11%

16%

25%

4%

25%

0%
50% 25% 0% 25% 50%

50% 25% 0% 25% 50%

Decreased/decreased significantly
Increased/increased significantly
Note: Based on responses from 552 financial officers in Asia and 601 from top-tier
companies in Europe in 2011.
Source: 2011 Asian and European Large Corporate Banking Studies

share reporting diminished access more than doubled to

20% from 9%. The share of Chinese companies reporting
improved access to CAPEX funding fell to 26% in 2011
from 48% in 2010 and the share reporting decreased
access jumped to 21% from zero. Similar shifts were
reported by companies in Hong Kong/Macau.
Nevertheless, credit conditions for large companies in Asia
remain much more benign than those facing companies
in Europe, where companies on net reported decreased
access to funding and financial products for a range
of functions, including ongoing operations, CAPEX,
acquisitions and others. In Europe, companies that have
traditionally relied on bank financing are now opting
to tap capital markets for funding that, in the current
environment of shrinking bank balance sheets, is often
cheaper and more reliable, says Greenwich Associates
consultant Markus Ohlig. In Asia, even as companies
make greater use of capital markets and other alternatives,
the use of bilateral bank credit has climbed steadily as
banks compete aggressively for corporate business.

75%

Note: Based on responses from 148 financial officers in Asia in 2011.

Source: 2011 Asian Debt Capital Markets Study

volume up nearly 14% from 2010 to 2011, according to

Bloomberg data.
The shares of companies planning to issue bonds in all
these markets in the year ahead are slightly smaller, but
demand is expected to remain quite strong by historic
standards. Of particular note: 26% of companies expect
to issue RMB-denominated offshore bonds in Hong
Kong, with companies pursuing these transactions in
order to take advantage of lower RMB funding rates relative to onshore issues and to settle trade transactions with
mainland China counterparties. Such strong demand
points to continued growth for a market in which issuance more than quadrupled in volume terms from 2010
to 2011, according to Bloomberg data.
Expected Demand for Funding Reflects Confidence

Relatively high levels of demand for capital markets

transactions reflects a general sense of optimism among
Asian companies about the business environment for
Need for Funding
Asia

Debt Capital Markets

Although the share of Asian companies using debt capital

markets for funding declined last year, most of that dip
can be traced to a sharp fall-off in the share of companies
issuing euro currency bonds. Asian companies pullback
from euro currency bond markets contributed to an 11%
decrease in Asia ex-Japan G3 currency bond issuance from
2010 to 2011, according to Bloomberg Asia Pacific fixedincome market data. Over the same period, however,
the share of Asian companies issuing U.S. dollar bonds
actually increased to 34% in 2011 from 30% in 2010 and
the share issuing local currency bonds in Asia jumped
to 61% from 55%. The growing share of companies
tapping Asian markets helped push local currency bond

50%

Percent of companies that expect to issue in 2012

Percent of companies that issued in 2011

Ongoing operations

2%

Europe
40%

5%

14%

33%

6%

8%

Capital expenditures

5%

Hedging products

7%

32%

6%

8%

Structured finance

7%

24%

7%

8%

Acquisition finance

7%

18%

50% 25% 0% 25% 50%

11%

8%

50% 25% 0% 25% 50%

Decreased/decreased significantly
Increased/increased significantly
Note: Based on responses from 552 financial officers in Asia and 601 from top-tier
companies in Europe in 2011.
Source: 2011 Asian and European Large Corporate Banking Studies

GREENWICH REPORT CONFIDENTIAL

Decline in Use of Hedging Products

The results of Greenwich Associates research reveals a meaningful
decline in Asian companies use of hedging products last year,
including foreign exchange transactions and interest rate derivatives. The share of Asian companies employing foreign exchange
declined to 87% in 2011 from 91% in 2010, and the share using
interest rate derivatives dropped to 32% from 37%. These
declines reflect the challenging conditions many Asian companies
faced last year, including high levels of currency volatility and the
dramatic strengthening of the U.S. dollar against many emerging
market currencies that took many companies by surprise, explains
Greenwich Associates consultant Fion Tan.

Willingness of Banks to Extend Credit

(point score out of 100)
Japanese banks

65

Asian banks

63

U.S. banks

63

European banks

59
0

Product Use
Percent of Respondents
82%
77%
73%

Bilateral credit
42%
40%
40%

Syndicated credit
Funding

28%
33%
34%
27%

Debt capital markets

Note: : Evaluations are based on a 5-point scale from 5 Excellent through

1 Poor with a point score that weights those evaluations as follows:
100 excellent, 50 above average, 25 average, 12.5 below average, and
0 poor. Based on responses from 551 financial officers in Asia in 2011.
Source: 2011 Asian Large Corporate Banking Study

Greenwich Recommendations

32%
37%
32%

Interest rate derivatives

8%
8%
9%

Commodity derivatives

27%
22%
19%

M&A advice
8%
Equity capital markets

2011
2010
2009

75

87%
91%
84%

Foreign exchange

Hedging

50

their success in winning business and relationships with

Asian companies. The only factor that even compares
to credit availability and pricing in these terms is financial stability, and all three of these considerations are
increasing in importance to companies relative to banks
capabilities and service quality.

39%
41%

Structured finance
transactions

25

19%
14%
0%

25%

50%

75%

100%

In a finding that might surprise some treasury officers,

Asian companies rate Japanese banks as being the most
willing to extend credit and the most competitive in their
pricing. With European banks pulling back on balance
sheet commitments, Greenwich Associates recommends
large Asian companies contact Japanese banks to inquire
about lending policies and terms. This could represent
a new and important alternative source of financing for
growing Asian companies.

Note: Based on responses from 551 financial officers in Asia in 2011, 562 in
2010 and 561 in 2009. Source: 2011 Asian Large Corporate Banking Study

Most Competitive Pricing

2012 and their subsequent need for funding. Although

there is widespread concern that economic growth rates
are slowing in Asian countries, one-third of Asian companies report increasing need for funding for capital
expenditures, and 40% say they have growing need for
funding for ongoing operations. In both categories the
share reporting declining need for funding is 5% or less.

Japanese banks

50%

Asian banks

36%

U.S. banks

36%

European banks

30%
0%

This sustained need for financing has kept Asian companies

focused on credit. Banks willingness to extend credit at
competitive prices is by far the biggest determinant of

20%

40%

60%

Note: Based on the weighted average percentage of respondents rating banks from
the region as most competitive in pricing. Based on responses from 551 financial
officers in Asia in 2011. Source: 2011 Asian Large Corporate Banking Study

GREENWICH REPORT CONFIDENTIAL

Consultants Markus Ohlig and Fion Tan specialize in Asian

corporate banking and finance.
Methodology

From September to November of 2011, Greenwich Associates

conducted 552 interviews in large corporate banking and 148
in debt capital markets with financial officers (e.g., CFOs, finance
directors and treasurers) at companies in China, Hong Kong,
India, Indonesia, Malaysia, the Philippines, Singapore, South
Korea, Taiwan, Thailand, and Vietnam. Subjects covered included
product demand, quality of coverage, and capabilities in specific
product areas.
The findings reported in this document reflect solely the views
reported to Greenwich Associates by the research participants.

They do not represent opinions or endorsements by Greenwich

Associates or its staff. Interviewees may be asked about their use
of and demand for financial products and services and about
investment practices in relevant financial markets. Greenwich
Associates compiles the data received, conducts statistical analysis
and reviews for presentation purposes in order to produce the
final results.
2012 Greenwich Associates, LLC. All rights reserved. No portion of
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