PARIS (MNI) – Large French firms are finding it harder to obtain
bank loans, even at higher borrowing rates, according to a poll of
company treasurers conducted earlier this month.

Treasurers’ evaluation of bank lending margins has risen sharply in
recent months and edged up further in December, approaching the peak at
the end of 2008, the height of the financial crisis, according to
monthly surveys by the national association of company treasurers (AFTE)
and the economic think tank Rexecode.

At the same time, the treasurers’ assessment of the ease of
obtaining bank loans dropped to a three-year low, also not far away from
the trough of late 2008.

“The combination of these two indicators thus points to a
tightening of credit terms for large firms,” Rexecode said, noting a
spinoff effect in longer payment delays.

This recent credit crunch has not yet appeared in lagging hard data
collected by the Bank of France. These show a rise of 27 basis points in
average medium- and long-term borrowing rates from April to 3.60% in
July — still some 200 points below peaks in 2008. There were smaller
rate increases for short-term loans.

More recent hard data for credit volumes do show a slowdown in
growth, but no decline. The seasonally adjusted average annualized
increase in loans to non-financial firms amounted to 4.8% for the three
months through October, down from 5.5% in September and 8.0% in August.

Besides the time lag for the hard data, there is a difference of
sources to take into account, since the Bank of France canvasses banks,
whereas AFTE and Rexecode survey companies, noted Rexecode director
Jacques Anas.

Individual responses “do confirm that [bank] margins are rising and
sometimes quite substantially,” Anas told Market News International.

The apparent credit squeeze comes at a time when large firms’
operating cash flow is diminishing and total cash reserves are well
below average, the survey showed.

“The results are consistent with the view that credit conditions
have continued to worsen and that France is indeed facing a situation
that is comparable to end-2008,” commented UBS analyst Stephane Deo.

Moreover, the survey results correlate very highly (80-85%) with
results of the ECB’s bank lending survey, providing “good indications
for the euro area,” Deo noted.

In light of the relatively weak profits of French firms, tighter
credit could accentuate the retrenchment in investment widely expected
next year, thus compounding the economic slowdown, especially if rating
downgrades limit access to alternative financing via bond markets.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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