Standard Chartered said on Monday that it was allocating $1bn of “financing for companies that provide goods and services to help the fight against Covid-19, and those planning the switch into making products that are in high demand to fight the global pandemic.”
Hard to argue with that — you wouldn’t want an investment bank, or even a commercial bank, suddenly reinventing itself as a manufacturer of ventilators or recruiter of essential medical staff. Banks know how to lend money, and standing ready to do so is the right way for them to help.
But it is hard to see how Standard Chartered’s policy will be different from what went before — or from the ways other banks have chosen to support their clients as the coronavirus crisis unfolded.
The companies covered will be “those associated with helping to tackle Covid-19, including manufacturers and distributors in the pharmaceutical industry and healthcare providers, as well as non-medical companies that have volunteered to add this capability to their manufacturing output — goods in scope include ventilators, face masks, protective equipment, sanitisers and other consumables.”
It's fair to say, though, that the other corporate lending prospects out there aren’t looking too great at the moment. Plenty of companies in struggling sectors want their banks to provide huge revolvers at cheap rates which they can draw on immediately, helping them through the troubled times.
Those companies with a hand in tackling the virus, or which are rapidly retooling to make medical kit, however, are among the few firms likely to see growing revenues at a time of lockdowns across major economies.
At the same time, banks aren’t struggling too much. Exceptional liquidity support from all the major central banks, new swap lines, and market access (at a price) are all present for the big firms Standard Chartered competes with.
Even the banks that have to fund major revolver drawdowns from existing clients may find the money returns to them through the back door, in the form of corporate deposits — and they do want to lend, to the right companies.
Standard Chartered said it will provide the financing at “preferential rates”, in the form of loans, working capital facilities, import/export finance. Spreads have blown miles wider as the crisis has taken hold, with euro and US leveraged loan prices both down nearly 20 points from before the coronavirus panic.
But determining a preferential rate is never easy and Stan Chart will not be disclosing what it pays, nor how are they will be determined, claiming client confidentiality.
That’s an understandable concern, and each type of financing is different. For purely commercial reasons, though, a lender is likely to look more kindly on a company which expects to see some actual revenue in the next few months rather than one clawing about for emergency capital — and thus any finance rate will indeed be “preferential” for a company retooled to fight coronavirus compared to their peer group whose businesses have shut down.
Coronavirus countermeasures can be both useful and a nice opportunity for a good news press release — much as allocations of lending to support ESG activities once were.
Standard Chartered’s move certainly can’t hurt, and anything that can be done to fight the virus deserves some sort of applause. But the bank’s rivals must be kicking themselves for letting Stan Chart hog the glory for doing all the same lending business that they are.