IBEX-35 non-financial corporations are now funding themselves more with bonds than bank lending

Analysis of the corporate financing structure

• At the close of 2015, total Fixed Income financing across IBEX-35 non-financial corporation reached €115bn, compared to €83bn of short and long term bank lending.
• Non-financial corporations’ equity forming part of the IBEX-35 have increased by 15.4% from 2010 to 2015, while bank financing fell by nearly 40% and financing via debt issuance rose by 23%.
• The number of non-financial corporations issuing bonds has risen from 4 in 2008 to 39 in 2014 and 31 in 2015. 
• The MARF is contributing to this trend: 26 companies have made issues worth a total of €3bn since 2013

Spain’s leading listed non-financial corporations are contributing to creating a more stable, flexible and resilient financial system. Analysis produced by BME’s Research Department, based on audited accounts for a homogenous group of IBEX-35 non-financial corporations, shows that between 2010 and 2015 this group of companies increased their equity by 15.4% and lowered their debt financing by 12.2%. This was reflected in a close to 40% decline in bank lending and a concurrent 23% increase in the volume of Fixed Income issues.

This evolution is coherent with the figures reported in a study entitled “The financing of Spanish companies on bond markets”, which analyses developments between 2006 and 15. According to this expert report, which is also available on the BME website, “the total volume of issuance increased considerably from 2009, in line with global trends towards increased financing via capital markets following the financial crisis. As such, the annual volume of issuance increased from $10.68bn in the period 2000-08 to $27.429bn during the period 2009-15”.

These figures highlight how leading non-financial corporations – the majority of them in the IBEX-35 - are taking action in line with the financial restructuring strategies recommended by the majority of international financial organisations. In short: more capital and less reliance on bank financing, leading to an increased weight of exchange-traded debt instruments within the overall external funding structure.

Financing through Fixed Income at the end of 2015 at non-financial corporations in the IBEX 35 reached €115 billion, compared to €83 billion via short and long term bank lending.

Total equity of the previously mentioned group of listed non-financial corporations reached €151bn in 2010, representing 26.5% of their balance sheet, while in the 2015-audited accounts it represented 30.5%, at €175bn. The strengthening of equity capital has not only been supported by retained profits but also through recourse to stock markets in the form of capital increase operations, which remained at figures of around €30bn in effective value terms in 2012 and 2015.

According to analysis undertaken by BME’s research team, between 2010 and 2015, non-financial corporations integrated in the IBEX-35 reduced their financial debt by 5.1% from €421bn to close to €400bn by the end of 2015. Within debt financing, the 39.8% reduction in banking funding is particularly notable, as well as the 23% increase in debt issuance. On a term basis, long-term corporate debt increased by 13.7% to €94.7bn in 2015; this is well above the equivalent figure for long-term bank financing in the same year (€65.8bn). Meanwhile short-term corporate debt increased by 96.8%, reaching €20.3bn in 2015 with a notable acceleration in growth in 2015.

As explained in the previously mentioned document, in 2007 and 2008 only 8 and 4 Spanish non-financial corporations respectively were able to issue on bond markets. In 2013, barely five years later, 30 companies issued debt, reaching 39 in 2014 and 31 in 2015. The amount of issuance also increased significantly, rising from €8.98bn in 2008 to €38.09bn in 2013, €30bn in 2014 and €24.49bn in 2015.

BME has played an important role in this development, broadening the financing options available to firms by setting up the MARF in 2013. Since its inception, the MARF has supported direct issuance by 26 companies and a further 122 have issued via Securitisation Funds for a total amount of around €3bn.

As emphasised by Domingo García Coto, Director of the BME Research Department, “The growing presence of companies in stock markets, both with equities and fixed income instruments is exceptionally positive in terms of supporting corporate growth, employment and the overall Spain economy. I believe it is illustrative of a dynamic that should be given greater weight within policy-making to ensure our economy achieves higher and better levels of competitiveness”