The development of the bond market and syndicated loans

Chapter 2. The outlook for the development of syndicated lending in the Russian Federation

2.1 Analysis of the development of a syndicated loan in Russia

In international practice, syndicated lending is quite common. In Russia, this market was fully formed only in 2014 and, despite numerous, including legislative, obstacles, has very promising prospects. Particularly important is the development of the segment of ruble syndicated loans to regional borrowers.
The main limitations to the development of lending to the real sector of the economy are the low capitalization of the Russian banking system and the requirements for compliance with prudential standards. In this situation, syndicated lending can be an effective tool for developing credit relations.
In international practice, syndicated lending is quite common. So, according to the American consulting company Thomson Financial, in the first half of 2016, the syndicated loan market grew to $ 1.5 trillion. The largest syndicated loan for this period was attracted by General Electric Capital Corp. ($ 25 billion), and in Europe the most significant borrower was the company Volkswagen ($ 15.3 billion).
In Russia, the syndicated loan market began to develop since the end of 1995. Until June 1998, only foreign banks were lenders, and until 1997 the main borrowers were only large Russian banks and only then - the companies of the fuel and energy complex. The bulk of external syndicated borrowings came in 1997 and amounted to $ 10 billion (in 1996 - only $ 250 million), of which over 65% - loans to Gazprom. The first syndicated loan organized by a Russian bank (Evrofinance Bank) was a loan of $ 25 million, provided by ALROSA in 1998. The 1998 crisis severely affected the syndicated loan market. So, in 1999 the amount of loans decreased to the level of 1996 and amounted to $ 230 million.
Since 2000, the revival of the syndicated loan market has begun. As a result, the national syndicated loan market was fully formed only in 2004.
If we look at the indicators for a syndicated loan for 2008, then a sharp decrease is noticeable (Fig. 1). Perhaps one of the main reasons for this situation was the crisis, and many banks were not able to issue large loans, and there was a big risk of non-repayment of loans and therefore lenders were more cautious about borrowers. According to the forecasts of many analysts, by 2017 the volume of the Russian syndicated loan market will start growing and exceed $ 90 billion.
The entire market is developing dynamically - the volume of loans is growing, and rates are decreasing. For five years for Russian borrowers abroad, they declined on average from LIBOR + 4.3% to LIBOR + 1.8% per annum and from 11.6% to 8.7% per annum in US dollars domestically. The average term of a loan abroad grew from one to three years, and in Russia - from six months to t

Fig. 1. The largest banks - the organizers of syndicated loans in Russia in 2016.

The leading positions in 2016 belong to five investment banks: BNP Paribas, ABN AMRO, Calyon, Citigroup, Societe Generale, which together account for more than 50% of the market (Figure 1).
Foreign banks dominate this market, but the participation of Russian organizations in syndication is becoming increasingly popular, but Russian banks often do not organize such loans, for example, VTB's subsidiaries VTB Bank Deutschland ($ 180 million) and VTB Bank Europe ($ 138 million)
An analysis of the Russian syndicated loan market shows that most of the loans are provided in foreign currency, and the leading positions are held by foreign banks. This situation is due to a number of objective factors:
- Foreign financial institutions have a high capitalization, which is ten times higher than the capitalization of Russian banks;
- foreign banks have many years of experience in conducting operations on syndicated lending by foreign banks;
- foreign organizers have an excellent reputation, which attracts first-class borrowers.
In addition, until recently, financial resources in the Russian market were quite expensive, and their limitations were obvious. Therefore, the majority of syndicated loans are organized by foreign banks, which, compared to domestic ones, have not only much more experience, but also more connections in the market of Western, Eastern and Asian capital
We can assume that in the near future this situation will not change significantly. In these circumstances, Russian banks need to develop a segment of ruble syndicated loans to regional borrowers. The development of this segment will be facilitated by: EBRD support, increased liquidity of the ruble market, the predictability of the national currency, the introduction of its convertibility, the growth of retail and corporate lending in rubles by banks, the emergence of medium and small borrowers on the market. The development of a regional syndicated loan facility with the participation of regional banks can become an alternative to large and medium-sized Russian banks to expand the branch network.
Syndicated loans at the present stage is one of the most promising ways of penetration of large banks into the regions. The development of syndicated lending in the regions will have a positive effect for both banks and borrowers.
For banks, the positive trends in the use of consortium financing are:
- expansion of credit expansion in conditions of unlimited resources;
- increasing the competitiveness of regional banks and maintaining the priority in the banking market;
- diversification of credit risks and their minimization;
- improving the quality of loan portfolios of participants and evaluating the borrower.
For regional borrowers, the attraction of syndicated loans also has several advantages:
- the resources attracted in this way are more "long" and "cheap" compared to traditional loans, because the sources of lending are diversified;
- the borrower creates a public credit history with a large number of creditors;
For many regional companies, the use of syndicated loans can be the first experience of conducting public transactions, which is useful when organizing further loans. At the same time, borrowing a syndicated loan requires borrower credit history, reporting, disclosure of the ownership structure of the enterprise. Many enterprises still have little idea of the advantages of syndicated lending in comparison with traditional ones.
So far, Russia has not had syndicated loans in the full sense of the word. However, the logic of the development of the banking system objectively should soon lead to an increase in syndicated lending within the country. At the same time, there are a number of obstacles to the formation of a civilized market in Russia, which must be overcome for the successful development of syndicated lending:
1. Lack of trust between Russian banks. The liquidity crisis