View from City Road: All-aboard the merry-go-lend

Is it 'here we go again' time in the lending market? With the lessons of the late 1980s apparently already forgotten, bankers seem to be embarking on a new lending binge. Even the Japanese banks, out of the international market for four years now, are aggressively back in there. Big blue- chip borrowers can virtually write their own terms, so desperate are the banks for new business. Margins are the keenest they have been for years, with many syndicates prepared to lend not just on an unsecured basis, but without financial convenants either.

Chemical Bank is so worried about developments that it is threatening to withdraw entirely from underwriting or lead-managing syndicates that lend without covenanted cover. For the moment, this seems to be more of an international phenomenon than a domestic one. Bank of England figures do not indicate any significant pick- up in corporate lending. But anecdotal evidence suggests that may be about to change, with many banks said to be aggressively back in the domestic corporate lending market.

So far, banks seem to have been relatively cautious in their approach, but then we are still at an early stage in the cycle. While it is true that competition is intense and the margins wafer thin, it is also the case that on the whole ridiculous terms are only available to the best customers. The test will come later.

However, even if banks have learnt their lesson, it is clear there is not much money to be made out of corporate lending any longer. The really big bucks are earned in securitisation and derivatives, where the fees are vast. As Sir Denis Weatherstone, chairman of JP Morgan, would say, there's no such thing as banking any more.