Wednesday, 30 January 2013

For French corporate treasurers, financing remains difficult and expensive

"Thus, the use of fiat money is more justifiable in financing a depression than in financing a war." - Carroll Quigley, American writer.

In our conversation "The European crisis: The Greatest Show on Earth", we indicated:
"When it comes to credit conditions in Europe, not only do we closely monitor the ECB lending surveys, we also monitor on a monthly basis the “Association Française des Trésoriers d’Entreprise” (French Corporate Treasurers Association) surveys."

One particular important indicator we follow is the rise in Terms of Payment as reported by French corporate treasurers. The latest survey published on the 16th of January points to a slight improvement in the Terms of Payments:
The monthly question asked to French Corporate Treasurers is as follows:
Do the delays in receiving payments from your clients tend to fall, remain stable or rise?
Delays in "Terms of Payment" as indicated in their January survey have been reported a decrease by corporate treasurers. Overall +17.9% of corporate treasurers reported a decrease compared to the previous month (+26.5%), bringing it back to the level reached in August 2011 (18.5%). The record in 2008 was 40%.

According to their latest survey, the decrease is due to collection actions undertaken at the end of the year, which according to the survey warrants confirmation in the coming months in relation to the easing in the delays in Terms of Payments for corporate treasurers in France. Overall, according to the same monthly survey from the AFTE, large French corporates treasurers indicated that they are still facing an increase in delays in getting paid by their clients for 24.4% of them but less than what they indicated in December. (30%).

What remains difficult though for French corporate treasurers according to the survey is access to financing. There is a slight improvement in the latest survey, but conditions remain tough for French companies:
While the rebound from the lows of the end of 2011 (which was due to the acute liquidity crisis faced by the European financial system), the LTROs have somewhat improved financial conditions for French corporate treasurers, nevertheless conditions remain tough.

In order to comprehend the opinion of French corporate treasurers on the evolution of banks' margins, the AFTE calculates a difference between the average interest rate applied to new corporate loans and the 3 months Euribor rate. The series below stopped in November and indicated some stability in banks' margin on new corporate loans. New credits above a one year maturity provided  to French corporate treasurers remains at elevated levels:
"Problems are not stop signs, they are guidelines." - Robert H. Schuller, American clergyman 

Stay tuned!

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