Since the start of the pandemic, the market share of the major US banks in syndicated loans in Europe has fallen sharply.
Credit losses and falling asset prices
In its latest report on financial stability, the FED noted that the global pandemic posed "considerable risks" to businesses and households. The central bank notes that financial tensions could increase if the crisis persists.
With tens of thousands of employees laid off, US banks have been particularly hard hit by the coronavirus crisis. Banks had to set aside colossal provisions for credit losses in the 1st quarter. JP Morgan Chase set aside $6.8 billion, bringing total provisions to $8.3 billion. At the same time, the bank's profits in terms of assets fell by 69% to $2.87 billion. Wells Fargo, America's fourth-largest retail bank, saw its profits plummet by 89% over the period.
U.S. banks present in major bond transactions
Nearly 500,000 French companies have already benefited from a state-guaranteed loan (PGE), representing an amount of 100 billion euros, recently declared the CEO of Bpifrance. Major PGEs, such as the 180-million euro loan obtained in May by Constellium (ex-Pechiney), are mainly granted by French banks and a few European banks. U.S. banks participate very little in these operations. Indeed, the only time they have appeared in these emergency loans was for the Europcar car rental company (220 million euros).
This absence of US banks is confirmed by data from Refinitiv. European banks are the biggest participants in syndicated loans, with a 71.5% market share between March 15 and May 15, compared with 7.5% for US banks. Over the same period between 2018 and 2019, the latter nevertheless posted a 13% market share.
The Wall Street giants may be absent from government-backed loans, but they are still involved in major bond transactions. In April, several of them, including Bank of America, Citigroup, Goldman Sachs and JPMorgan, financed Airbus to the tune of $3 billion. Some also participated in the 2.5 billion euro bond issue forAéroport de Paris. It remains to be seen whether these banks will be ready to commit to supporting their European customers in the event of a resumption of the epidemic.