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* Bank of America, others cut lending to Europe clients
* Goldman Sachs and JPMorgan more selective in lending
* European banks pressured to help national companies
* BNP Paribas wins market share across Europe
(Adds no comment from Citigroup)
By Arno Schuetze, Pamela Barbaglia and Maya Nikolaeva
FRANKFURT/LONDON/PARIS, April 24 (Reuters) - U.S. investment
banks are shrinking lending activity in Europe as the
coronavirus crisis forces them to retreat home, allowing BNP
Paribas and other European lenders to fill the funding gaps and
grab market share, seven sources told Reuters.
Facing unprecedented demand for loans, and under pressure to
support their local economy, the likes of Bank of America
and JPMorgan have taken a more cautious approach
on Europe, the sources said, speaking on condition of anonymity.
Goldman Sachs, Morgan Stanley and Citigroup
have also become more risk-averse in taking lending
decisions in Europe as they fret over a wave of potential loan
defaults, the sources added.
With U.S. banks focusing on their home turf, France's BNP
Paribas is using its robust balance sheet to gain
market share by increasing lending across the continent,
according to the sources and Refinitiv data.
Bank of America, JPMorgan, Goldman Sachs, Morgan Stanley,
Citigroup and BNP Paribas all declined to comment.
The U.S. banks remain active on selective deals, however,
with Goldman Sachs and Citigroup underwriting a 3.5 billion euro
credit facility for Fiat Chrysler in March.
They are also deploying different financing tools - such as
issuing bonds as well as providing bridge capital or bilateral
loans - to spread their bets in Europe.
Sources at the banks say that their European rivals can
afford to be more aggressive in their capital allocation as they
can access ultra cheap financing from the European Central Bank.
The retreat of Wall Street's giants nonetheless follows a
lending bonanza of several years, with U.S. lenders consistently
dominating European investment banking league tables since the
financial crisis in 2008, Refinitiv data shows.
"U.S. banks are right now more concerned with their domestic
commercial and retail banking activities, so they are taking a
more careful approach to Europe," said Societe Generale Germany
country head Guido Zoeller.
Bank of America, for example, turned down requests by
British events organiser Informa in March to underwrite
a new 750 million pound ($926.5 million) credit line, according
to one source with direct knowledge of the matter, despite being
its joint corporate broker.
BNP Paribas, HSBC and Spain's Banco Santander decided
instead to take on the job and underwrite the facility, while
Goldman Sachs and Morgan Stanley agreed to syndicate the debt.
Bank of America subsequently failed to land a key role in
handling Informa's share sale on Apr. 16 which raised 1 billion
pounds and was led by Goldman Sachs and Morgan Stanley as joint
global coordinators, the source said.
Informa did not respond to a request for comment.
A source close to Bank of America said the bank had
committed more than $9 billion to European clients for liquidity
back-up facilities since March 1.
FRENCH OFFENSIVE
BNP Paribas, under CEO Jean-Laurent Bonnafé, leads both
Refinitiv and Dealogic's league tables for syndicated loan
bookrunners in Europe, with Dealogic data showing it has
underwritten $32 billion worth of loans so far this year.
Despite oil market turmoil, BNP Paribas solely underwrote a
$10 billion credit facility for Britain's BP on Apr. 6.
It is unusual for one bank to underwrite such a large facility
alone, particularly in a sector under strain.
French lenders Societe Generale and Credit
Agricole, along with Santander and Italy's
UniCredit, have also moved to fill the lending gap,
Refinitiv data shows.
While facing pressure to provide much-needed financing to
domestic businesses, French banks have the backing of the
country's political establishment to expand overseas.
Having high levels of liquidity means French banks are
likely to be less affected from the fallout of the coronavirus
pandemic than other European lenders, one of the sources said.
BNP is widely seen as having emerged a relative winner from
the financial crisis by keeping a tight rein on costs and risk.
French banks say they have built up higher capital ratios and
liquidity levels than during the last crisis.
"The French banking system is seen as the most active and
the most solid," said a Paris-based banking source.
EXCEPTIONAL DEMAND
American banks' international focus had to give way as the
fallout from the coronavirus pandemic has triggered exceptional
demand for liquidity from both U.S. and European clients.
The eight banks topping this year's Refinitiv league table
for syndicated loans are all European, while Bank of America -
which was number one last year - has slipped to 10th position,
providing around $6 billion of loan commitments.
JPMorgan is the highest-ranked American bank, in ninth
place, down from seventh last year.
For an interactive version of this graphic, click here https://tmsnrt.rs/2XZv6NO
<https://tmsnrt.rs/2XZv6NO
>
Banks have seen cash-strapped clients around the world draw
down more than $150 billion of revolving credit facilities in
the first quarter of the year as business activity came to a
halt in many countries.
The rush to deploy lifelines has prompted lenders to set
aside billions of dollars in provisions to cushion potential
losses, while missing financial targets and stomaching sharp
declines in profit.
The bleak outlook, combined with a series of government
relief packages for struggling businesses in the United States
and Europe, has increased pressure on lenders to prioritize
domestic clients, using state guarantees to rescue companies.
"In this crisis most banks need to align their interests
with their own governments' and come forward to support
state-backed schemes," said a London-based banker.
"That's where nationalism comes from. It leaves banks with
tough choices to make as there is huge demand for liquidity
across borders."
($1 = 0.8095 pounds)
(Reporting by Arno Schuetze in Frankfurt, Pamela Barbaglia,
Abhinav Ramnarayan in London and Maya Nikolaeva in Paris;
Additional reporting by Karin Strohecker; Editing by Pravin Char
and Alexander Smith)
