Asian banks cautious about aircraft financing: panel

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Asian banks are cautious about financing aircraft as ongoing troubles in the financial markets continue to limit the amount of lending available from European banks, financiers said at the ISTAT Asia conference in Singapore.

"They are stepping in cautiously but it's not clear to what extent they will fill the capacity," said Thomas Baker, vice-president of the investment banking division at Goldman Sachs.

Traditional bank lending in Asia will continue and there is still liquidity for aircraft financing in the market, Boey Yin Chong, managing director of syndicated finance at DBS Bank, said at the same panel discussion.

"Liquidity is not dead. I think there is still a fair amount of liquidity that can be extracted. Question is how you can extract that, and in what terms," he added.

Asian banks, however, are usually more "methodical and take more time" to step in, and capital markets are where the funds lie, said Baker.

"Until the Asian banks participate in a meaningful way, investors in capital markets will fill the missing space and capital markets will be the key source of capital going forward," he adds.

The panel expects lending to get more expensive as regulatory changes such as the Aircraft Sector Understanding and Basel III banking regulatory framework are set to kick in.

The panellists, which included Garry Burke, chief executive of Pembroke Capital, and Bertrand Grabowski, member of the board of managing directors at DVB Bank, also see a shift towards more leasing of widebody aircraft.

While Pembroke Capital had an all narrowbody fleet five years ago, 52% of its fleet is now made up of widebody aircraft.

"There will be more widebodies in lessors' portfolio as they realise that the narrowbody business is pretty competitive if they want to serve the yield they promise to their investors. They need to move to a different space," said Grabowski.