Orféor, which supports local government entities in managing their debt, cash flow and project financing, today revealed the results of the Local Public Sector Finance Observatory.
This study was carried out on the basis of all offers received and loan contracts signed over the course of fiscal year 2021 by Orféor’s client communities, and reports on the panorama of local public sector financial actors in 2021, starting with the evolution of banking supply as well as the 2022 forecast.
In short, what to remember
Rates are still low (<1%), but they are rising;
increased competition and a focused banking offer;
strong leader (La Banque Postale) and strong return from BPCE (CFF);
The advent of the 20-year fixed-rate loan…
“The year 2021, which was marked by the beginning of monetary policy normalization, a return to growth and inflation, as well as higher interest rates (especially long rates), was a very favorable year for borrowers. But uncertainties persist, which will not be without consequences for the public sector financing market in 2022 and should pay borrowers to work as soon as possible to secure what can be secured (rates, liquidity, savings, etc.) Summarizes Alexis Marechal, Orféor Expedition Director.
More competitive market, but favorable for large structures
While competition in general in the public sector finance market increased in 2021, with coverage rate (volume offered by banks/volume demanded by borrowers) compared to 2020 (to 430% vs. 394%), this upward trend is still particularly noticeable among grown ups. Communities (50,000 – 100,000 people) that have access to a larger market of lenders (finance platform in particular), in larger amounts… This rate also varies according to the solvency of the communities achieved through their ability to reduce debt.
The observatory notes that in 2021, “small” communities (less than 10,000 inhabitants) had access to only local and “historic” banks (5 lenders), without losing sight of AFP that continues to play its role as a source of diversification for this purpose. layer. While the largest communities faced an oversupply (20 lenders!).
La Banque Postale remains the flagship, strong return for BPCE
If we look in more detail at the players (funders) present in this market in 2021, the observatory emphasizes maintaining a good diversity of financial partners, with six major groups still dominating the market. They are joined by a new variety show but grouped under the auspices of funding platforms.
In terms of market share, La Banque Postale once again confirms its leading position (according to the Orféor Commission) with 34.2% of outlets recovering in 2021 (24.8% in 2020). It is followed by Compagnie de financement foncier, which gained nearly 15% market share in one year, accounting for 60% of new outlets in 2021. Crédit Agricole and Agence France Locale split 20% evenly, while lending institutions split evenly. The others (Banque des Territoires, SocGen, Crédit Agricole, Arkea, Crédit Mutuel, etc.) have seen a decrease in market share this year and are therefore satisfied with the remaining 20%.
It should be noted that while La Banque Postale is working to strengthen its position on smaller structures, BPCE is focusing more on larger accounts.
A focused and healthy competitive market, with new players, which allows diversification and improvement of the offering, and thus benefits the borrowers » Comments by Alexis Marechal, Orféor Expedition Director
unavoidable fixed price; The acclaimed 20th anniversary
Both the most offered by banks and the most demanded by borrowers, the fixed rate imposed itself, which in 2021 represents 98% of the new forecast.
The observatory also notes that unlike not so long ago when the 15-year fixed rate was dominant, the latter was sidelined in favor of 20-years which in 2021 account for more than 50% of contracts concluded. Borrowers are taking advantage of the current low rates to give themselves some leeway by offering loans.
Rates are going up but still very low
Although rates are generally high, they are still very low and will not exceed 1% in 2021: in 2021, the 15-year average rate was 0.73% (0.67% in 2020); At 20, it is 0.87% (0.77% in 2020). A situation that already seems to belong in the past because those rates have already largely exceeded 1% since the beginning of this year: 1.04% on average over 15 years and 1.23% over 20 years.
2022, the most expensive year for borrowers?
There is no doubt that the political and geopolitical context, inflationary pressures, monetary tightening policies and the rise in long interest rates will undoubtedly affect the coverage of financing needs in 2022.
In the face of these limitations and uncertainties, how does it act, cover its financing needs, and protect its levels of savings? In our opinion, the priority should be to launch its consultations as soon as possible, to find out what the banks offer, by doubling the sources and channels of borrowing, and renegotiating their aspects, with accurate specifications, and the possibility of using hedging tools. Alexis Marechal explains, before concluding: “While there is no doubt that the cost of 2022 will be higher, in the face of destabilizing markets and context, it seems more necessary than ever for borrowers to set a course and equip themselves with the tools that will allow them to have excellent budget visibility in order to finance infrastructure and equipment necessary »
Orféor supports and advises local public entities in managing their debt, cash flow and project financing. For 30 years, its 10 experts have worked with 300 local authorities and public institutions to constantly improve the management of their public finances.