Banks rethink lending levels on cheaper export credit

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Certain banks are shying away from the export credit market due to falling pricing levels, spurred by increased competition for deals among financiers, say sources.

Pricing on US Export-Import Bank financings range from 30-50 basis points over Libor, while the cost of European export credit agency (ECA) transactions range from 60-70 bps over Libor, say bank sources.

Just last month, three bankers told Flightglobal European ECA deals were being priced in the "high double digits" above Libor, while Ex-Im transactions were closing at Libor plus 60 bps.

"When I consider the cost of buying US dollars and the price of doing the deals, there is little incentive for me to fund export credit financings at these pricing levels," says a European banker, adding: "I know other banks are thinking the same."

According to a London-based financier, competition among bankers "remains rife" as export credit financing is still "very attractive" for airlines, even at higher pricing levels under the Aircraft Sector Understanding (ASU).

"ASU has not deterred many airlines and with more banks bidding on deals, particularly out of Japan, pricing is extremely competitive," says the source.

According to the financier, export credit funding, at the moment, makes sense for those banks that are interested in transaction volume, "But for those of us who are concerned about pricing, we will hold out for now," he says.