Financial entities expect to face 2024 with the same uncertainty as last year but with lower prices.
Although doubts prevail in the current geopolitical and macroeconomic scenario, those responsible for the bonds and loans of financial entities operating in Spain predict some certainties for the remainder of 2024. Mainly two: one market activity similar to that registered in 2023 and a less strict monetary policy than in recent months.
From the bonus team, UniCredit predicts the reduction of the rate, but from the second half of the year: “We understand that the economy has not yet recovered enough, especially in terms of inflation and employment. At least, not enough in the eyes of the central bank to change the monetary policy discourse as soon as possible.”
The prognosis is the same as MUFG Bank, as explained by Genoveva Ramn-Borja, head of Global CIB Corporate Coverage from the Japanese entity: “In anticipation of rate cuts in 2024, we expect that many issuers will fulfill their ambitions to extend the duration of their new bonds.” However, he explained, “as a series of macro- and geopolitical risks persist, among others, we do not see a return to pre-pandemic emission levels at the moment.”
Among the many causes of stress explained by Ramón-Borja, we find economic uncertainties as well as geopolitical ones. For example, as listed in the bonus team JPMorgan, “raising trade tensions with China, the current war between Russia and Ukraine, and the conflict in the Middle East.” And that added “the US presidential election, together with the elections of 40 other countries in the world, which may have a more serious geopolitical impact than in recent cycles given the context in which we know ourselves.”
In strict macroeconomic terms, the picture taken by professionals from financial institutions is also dangerous. It’s already in the fourth quarter of 2023; “several economic indicators have been recorded showing that the slowdown continues,” they remembered from the bonus team, Intesa Sanpaolo.
For example, they added “low consumer confidence” and that “companies find it difficult to transfer their increased costs to higher prices without affecting their sales volume.” To this, we must also add that the current interest rate situation is beginning to affect corporate balance sheets: “Liquidity positions are decreasing and financing costs are beginning to increase because the new and more expensive debt replaced the “previous, cheaper financing.”
Despite all these difficulties, the Head of Citi Syndications for Europe, the Middle East, and Africa, Andrew Mason, maintains that “2024 will be the year of big business.” With this statement, he predicted a rebound in activity in the corporate sphere, “with a tangible increase in mergers and acquisitions activity.” Among other reasons, Mason added, “Banks active in the Spanish credit market continue to be well capitalized and expected to continue to support their core customers.