Global bank debt issuance is continuing its post-financial crisis decline, according to a new report from Moody’s Investors Service.
The rating agency says that global unsecured debt issuance by Moody’s-rated financial institutions declined by 11% in 2013, compared to 2012. European banks are leading the contraction, it notes, as their debt issuance declined by 25% to $528 billion in 2013.
Moody’s says that this is the sixth straight year of a decline in European banks unsecured issuance, which now sits at just 41% of its peak level in 2007.
“With many European countries still mired in slow economic growth and persistent pressure on banks to reduce leverage, balance sheets are shrinking, cutting funding needs and driving issuance volumes down,” said Robard Williams, a Moody’s senior credit officer, and co-author of the report.
“Sector consolidation coupled with restricted capital market access has also halved the number of banks issuing debt to only 122 in 2013, compared to 246 in 2007,” Williams adds.
Notwithstanding the European pullback, Moody’s reports that issuance by North American firms has rebounded strongly since 2011. “Strong investor appetite driven by improving macroeconomic conditions and still-low interest rates have boosted unsecured debt issuance by 39% to $309 billion in 2013”, says the rating agency.
It also notes that Asian bank issuance remains broadly stable. And, that within the overall decline in Europe, subordinated debt issuance is up 33% year-over-year to $50 billion in Europe, “as regulators and resolution authorities’ clarification efforts have helped market participants price these securities and boost issuance.”