The pandemic payback

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The pandemic payback

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The coronavirus pandemic will test the complex relationship between bank loans and the fabled ancillary business supposed to make it all worthwhile. Some banks have provided heaps of extra cash for European clients to keep them alive and it has changed the shape of the loan market, with some banks ramping up market share. But will companies return the love when the time comes?

Ancillary business is a slippery concept. It is hard to quantify whether a mandate is won through the expertise of the winner or the depth of lending relationship.

Bankers categorically deny that offering large loans at attractive levels is directly related to winning business in other areas. But they also say lenders do not make money through the loan market.

Some banks have flexed their lending muscles during the pandemic, ratcheting up their disbursement to support companies in a dark time. BNP Paribas, HSBC and Santander, in particular, have heavily increased their market shares.

But what will be their payback? It is an open question.

In normal times, at least, banks do not lend to companies at attractive rates out of the goodness of their hearts, or from a sense of public virtue. They do it expecting fees for other services down the line.

Which companies take note of the banks that were there for them during the pandemic remains to be seen and so does whether the sweeping changes seen in the loan market league tables will be replicated in more profitable areas of the capital markets.

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