Italian banks cut company credit by 44 bln in 2012, says S&P

Bond issuance on the rise to replace bank funding

Italian banks cut company credit by 44 bln in 2012, says S&P

Milan, June 5 - Banks cut 44 billion euros worth of credit to Italian companies in 2012, according to a report by rating agency Standard & Poor's released on Wednesday. The rating agency said that it expected Italian companies to increase bond issuance given the credit crunch. Italian companies currently get 92% of their medium and short-term funding need from bank loans but the rating agency noted in its report that the credit crunch along and new fiscal and corporate rules recently introduced for medium-sized companies is likely to encourage bond issuance. Last year, corporate funding through bond markets totalled 20 billion euros, partially compensating bank-funding cuts. Standard & Poor's said that, in a zero-growth scenario, bond issuance could rise to 11-14% of funding to refinance existing debt in the next five years. But if the Italian economy were to start recovering, funding through bond issuance could rise to 14-17% in the same period from 8% at the end of 2012. The rating agency noted that ''greater recourse to the bond market could help improve Italian companies' capital structure and reduce financing risks because it could lengthen Italian corporate funding maturities and diversify the investor base''.

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