Consumer finance rebounds from crisis

Financial Times:

Finance companies that lend to consumers and smaller businesses in the US are finding it easier to fund themselves in the wholesale credit markets, marking a comeback from their troubles during the financial crisis.

Finance companies typically operate by borrowing in the markets and lending money at higher rates to their customers.

During the credit crunch, the cost of their funds rose to crippling levels, forcing industry leaders like CIT into bankruptcy. However, CIT quickly emerged from bankruptcy protection and leading finance companies are now regaining their access to the credit markets.

Bankers estimate that during this year’s third quarter, global financial companies – including deposit-taking banks as well as finance companies – will issue as much as $80bn-$100bn in debt, more than in either of the first two quarters.

“Financial firms have access to debt capital once again,” one senior banker said. “I give the speed of CIT in and out of bankruptcy as an example of how quickly credit has recovered.”

Jonny Fine, head of US investment-grade debt syndication at Goldman Sachs, said: “The unsecured markets are repairing themselves.

“We see investment-grade debt cheaper than it has ever been. There is capacity for institutional investors to lend to finance companies as long as they are more strongly capitalised than in the past.”