The disintermediation of business financing gathers pace in Spain, where the degree of bank financing was higher than in our neighbouring countries
The main non-financial listed companies have increased their equity by 24% while bank financing has fallen 42% since 2010
The challenge is for smaller companies to follow this trend through alternative markets such as MAB and MARF
The slump in bank financing in IBEX 35® non-financial companies is counterbalanced by a significant increase in financing in the form of short and long-term Corporate Debt issues. This modality, managed through the capital markets, has increased by 29%, growing from €90.8 billion in 2010 to €117 billion in 2016 for the companies that made up the IBEX 35® in 2010 and in 2016.
In its latest Annual Report, the Bank of Spain states that "a process of disintermediation in the financing of Spanish businesses is taking place", arriving at the same conclusion as the report by BME. Their equity has increased by 24% while bank financing has fallen by 42%, well below the volume of Fixed Income financing, which grows 29%, according to analysis by the Research Department of BME.
"As reflected in numerous recent studies, over the last few years the disintermediation and diversification of the financing structure of Spanish non-financial corporations has become a matter of fact over the last few years, which is positive for the Spanish business fabric as it reduces their financial vulnerability when faced with diverse shocks. This trend is largely in line with the financial challenges of Spanish companies, such as their imperative need to gain size, the reduction of their indebtedness - which has already taken place to a large extent - and the diversification of their funding sources particularly through specialised markets such as MAB or MARF, "said Domingo García Coto, Director of the Research Department of BME.
The ratio of equity capital on total assets of the largest Spanish companies already exceeds that of their European Monetary Union (EMU) peers. Between 2010 and 2016 the equity of the IBEX 35® companies increased by 24%. This figure is even more significant as these companies generally have easy access to bank financing and to Corporate Debt markets.
The strengthening of equity financing has been favoured not only by the retained profit but also by the recourse to the stock market in the form of capital increases, whose overall volumes totalled an annual effective volume in excess of €23 billion in the last four years.
In the last seven years – covered by the BME report on non-financial companies listed on the Spanish stock market - capital increases have totalled 60 billion euros.
On the Corporate Debt issues front, the change seen in non-financial institutions has also been striking since 2009. In the preceding ten-year period the average number of non-financial institutions that used this financing instrument was 10, while in the last seven years 188 companies have issued Fixed Income securities, with an annual average of 27 companies.
Bank financing is the one that has decreased most, particularly in Spain, where the degree of bank financing was higher than in our neighbouring countries. In 2016, the latest year analysed, this trend is more notorious. This scenario poses two major challenges: to get Spanish companies to increase their size and to open up market financing alternatives for medium and small companies.
The complete report is available (only in Spanish) through this link: http://ow.ly/uNOu30dwLDA