JPMorgan Chase & Co. (JPM) led lending to commodities companies for a third consecutive year even as global financing to the industry fell to the lowest since 2010. The biggest U.S. bank by assets arranged $44.1 billion of loans, giving the New York-based company a 7.8 percent market share, according to data compiled by Bloomberg. Bank of America Corp. and Citigroup Inc. (C) came next. Three Canadian banks were in the top 10, from one a year ago, as European lenders retreated. Loans fell 23 percent to $568 billion last year after mergers and acquisitions diminished to the lowest annual total since 2010. Deals accelerated in the fourth quarter to the highest in five years, including OAO Rosneft's $55 billion purchase of oil producer TNK-BP, as economic growth improved. Stock markets are rising for a third consecutive month after U.S. lawmakers reached a budget agreement. “Since there hasn't been much M&A for the past couple of years, there is some pent-up demand," said Thomas Cassin, co- head of investment-grade finance at JPMorgan in New York. “Having more clarity around the fiscal cliff, the debt ceiling and just the direction of the economy in general will bring to bear a bit more confidence and willingness to go out and look at the M&A." Raw Materials Commodities stagnated in 2012, with the Standard & Poor's GSCI gauge of 24 raw materials rising 0.3 percent, the least in five years. The 140-member Bloomberg World Mining Index (BWMING) advanced 2.9 percent, lagging behind the 13 percent gain in the MSCI All- Country World Index of equities. Natural-resource and energy companies announced $610 billion of mergers and acquisitions, 8.3 percent less than in 2011, data compiled by Bloomberg show. Bank of America, the second-biggest U.S. lender by assets, arranged $30.8 billion of loans, and New York-based Citigroup $30.6 billion, giving them both a 5.4 percent market share. Combined lending by the top three banks fell 36 percent from a year ago. Wells Fargo & Co. (WFC) overtook BNP Paribas SA (BNP) to take the fourth slot after buying $9.5 billion of the French bank's energy loans in February. The Paris-based lender retreated 10 places in the rankings, as rival Societe Generale dropped to 19th from 15th. The figures as of yesterday reflect transactions involving more than one bank and include credit lines, project or term loans and trade finance. Wells Fargo's total was $29.3 billion in loans, for a 5.2 percent share. Syndicated Loans “Declines in syndicated loans in the commodity and energy sector are consistent with trends in the broader market," said Peter Hall, the global head of investment-grade loan syndicates at Bank of America Merrill Lynch in London. “The next big wave of refinancing is due in two years, so 2014 and 2015 are going to be much busier." The average interest banks charge for loans to commodity companies has risen to 325 basis points more than benchmark lending rates, from 268 basis points in 2011, according to data compiled by Bloomberg. A basis point is 0.01 percentage point. Globally across all industries, banks charged 323.4 basis points above lending rates compared with 282.3 basis points in 2011. Syndicated loans across industries declined 21 percent to $2.99 trillion in 2012, data compiled by Bloomberg show. Canadian Banks RBC Capital Markets, a unit of Royal Bank of Canada (RY), led the advance by Canadian banks last year, taking fifth place with $28.4 billion of loans, little changed from a year earlier. TD Securities Inc., part of Toronto Dominion Bank, arranged almost $19.9 billion for seventh place, and was one of only two in the top 10 to increase overall lending, along with Barclays Plc. (BARC) Bank of Nova Scotia (BNS), based in Toronto, oversaw $16 billion of loans to take 10th place. Wells Fargo, Barclays, Nova Scotia and BNP Paribas declined to comment for this story. “Resource financing will go up this year," said Burke Smyth, the co-head of Canadian credit origination at TD Securities in Toronto. “There is nothing to prevent it from seeing an increase as commodity prices recover a bit, foreign companies start to look at Canada and the U.S. starts to grow." Canadian banks have been ranked as the world's strongest for five consecutive years by the Geneva-based World Economic Forum, data compiled by Bloomberg show. They are also buying more assets, including Bank of Nova Scotia's agreement in August to purchase ING Groep NV's Canadian unit for C$3.1 billion ($3.15 billion). The “banks are playing off the strength of their balance sheets and expertise that we have in metals and mining," said Mark Chandler, the head of Canadian syndicated and leveraged finance at RBC Capital Markets in Toronto. Canada is home to Barrick Gold Corp. (ABX), the largest gold miner, and Potash Corp. of Saskatchewan Inc., the biggest fertilizer producer. Commodities are about half of Canada's exports, government figures show. Mergers Data Natural-resource and energy companies announced $202.8 billion of mergers and acquisitions in the fourth quarter, accounting for 33 percent of the annual total, data compiled by Bloomberg show. Rosneft raised $16.8 billion in loans last month to finance the TNK-BP acquisition, to become the world's largest publicly-traded crude-oil producer. Loans to commodity companies in North America declined 24 percent to $317.9 billion while those in Europe, Middle East and Africa tumbled 31 percent to $140.9 billion, data compiled by Bloomberg show. There was an 8.7 percent drop in the Central Asia and Pacific Rim region to $92.7 billion. ‘Key Event' “A key event in 2012 was the return to stability of funding to the commodity finance market, even if the overall financing market volumes are down due to the pullback in metals prices and slower global economic growth," said Federico Turegano, the global head of natural resources and energy finance at Societe Generale in Paris. “The big question for 2013 will be how fast the Asian markets return to purchasing commodities, particularly China on the metals side." China is the biggest consumer of everything from copper to cotton to coal and it probably returned to faster economic growth in the final three months of 2012, having slowed for seven consecutive quarters, the mean of 35 economist estimates compiled by Bloomberg show. Chinese banks probably will lend more this year, with a focus on financing the nation's commodity cargoes, said Simon Tyler, the head of corporate banking at China Construction Bank Ltd. in London. “The Chinese banks are starting to compete more in the loans space," he said. “This year there will be much more. We are expanding from a relatively low base, so we are not going to be a major player yet but we will be doing a lot more." Higher Prices Lending may also increase this year should commodity costs rebound. A Bloomberg survey of 131 analysts, traders and investors last month predicted higher prices across industrial and precious metals and agriculture. Brent crude will trade above $100 a barrel for a third consecutive year, according to the median of 30 estimates compiled in December. It traded at $109.65 a barrel today. Bloomberg
