Europeans lift credit exposure
European banks have increased their lending to Australia for the first time since early 2011, as the rise in global confidence leads to a tentative recovery in credit markets.
After pulling nearly $80 billion from the economy in recent years, European banks increased their exposure to Australia to $12 billion in the September quarter, figures from the Bank for International Settlements show.
It is the first quarterly rise in European bank lending to Australia since the March quarter of 2011, when financial markets went into a tailspin over fears that big economies including Italy and Spain would be sucked into the region's crisis.
The increase, which came as global market confidence rebounded sharply, was driven by a $3.6 billion increase in lending by German banks, with Dutch lenders also raising their exposure to Australia by $2.3 billion.
It comes as bankers report signs of a more active role from European banks, which play a big role funding the Australian resource sector.
NAB's director of debt market origination, Stephen Boyd, said there were indications eurozone banks might be lending more to Australia because many banks' funding costs had improved.
"It's early days, but we are probably seeing more appetite from certain European lenders," he said. But it was "not like we are getting back to pre-GFC levels".
Lenders from the troubled eurozone have been rapidly withdrawing money from the Asia-Pacific region in recent years, with European bank loans to Australia falling from $314 billion in 2011 to $239 billion last year.
But in the September quarter, global financial market confidence received a jolt when European Central Bank president Mario Draghi pledged to do "whatever it takes" to save the region.
Alongside the bounce in European lending, Japanese banks also lifted their lending to Australia by $7 billion - a trend that is likely to reflect their central role in several major resource projects.
In a separate report published on Monday night, the Bank for International Settlements called for an overhaul of pricing gauges used by banks when lending to one another, as the sector continues to feel fallout from the Libor rigging scandal.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free