News - 25.06.2024

Focus On Corporate Finance

  • Banking

In the coming years, businesses will face substantial investments to keep up with the race for innovation affecting all sectors, particularly with a focus on climate transition and digital transformation. To achieve this, they will need to rely on the support of banks, which remain the primary source of funding in Europe.

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However, in such a tumultuous period as we are currently experiencing, is the relationship between lending institutions and businesses still as seamless? Our recent “Focus On” livestream brought together high-level speakers to explore corporate banking, its challenges, and strategies in light of geopolitical risks, rising interest rates, and inflation.

Given the current climate, Paul Donovan, Chief Economist for UBS Global Wealth Management, fears the rise of “economic nationalism” that could undermine the development of international economic and financial activities. “In a situation that is becoming more complicated for certain economies, policymakers will blame foreigners. The consequences will be barriers to the movement of workers, impacting multinational companies, and a reduction in international capital flows if the takeover of companies by foreign investors is restricted.”

The rise in interest rates and inflation has also limited companies’ operational flexibility. This context requires banks to exercise greater caution when granting loans. Anne-Sophie Dufresnes, Head of Corporate Banking at BGL BNP Paribas, explains that, generally speaking, “we need to deepen risk assessments, intensify communication, demand business plans that precisely forecast profitability, and ask clients to equip themselves with efficient liquidity analysis tools.”

To increase the overall credit capacity of banking institutions, Oliver Gehbauer and Guenther Poettler of Deutsche Bank observe a growing political will to bring securitisation activities, which have suffered from a severe lack of trust since the 2008 financial crisis, back to the forefront. The two securitisation specialists see this as an opportunity to strengthen banks’ capital and better support the real economy.

Finally, Dwayne Lysaght, Co-Head of EMEA M&A at J.P. Morgan, has observed a significant increase in M&A transactions worldwide since the beginning of the year, following a year in 2023 that saw a decline in activity. “Confidence is returning. Interest rates are decreasing, inflation is falling. Despite a year of uncertainties, I believe this upward trend will continue throughout 2024.”

View the full replay here.