The NAB’s credit team is out with its forecast for 2015 issuance from the Big 4 and says it expects the majors to issue, “around $134bn of long-term wholesale debt, $11bn up on FY14’s $123bn.”
In clarifying the uptick the NAB says the forecast is, “mostly explained by $113bn of term-debt maturing within the next financial year, but also expected loan credit growth of 5.4%, with between 15% and 20% of this increase requiring long-term wholesale funding.”
The GFC and the government guarantee meant that initially, “the Big4 stocked up on wholesale debt in the early days of the credit crisis (FY09 and FY10), particularly so on government guaranteed debt, before its removal in FY10.” They then focused on deposits and their share of funding but now appear pleased, with levels around 60%.
Going forward that means that the banks need for funds in 2015 will be driven by increased demand and funded through wholesale markets.
Many will say this amount shows an over-reliance on offshore markets to fund our majors. While to some extent this may be true the majors, and other ADI’s and the financial system as a whole is there to intermediate cash into the system as a result of Australian sourced demand.
So, where deposits can’t fund the system 100%, borrowing offshore is an inevitable consequence of this.