Study on community financing in Switzerland. Part 2: “Intermediary platforms benefit everyone”.

by | Dec 18, 2020 | Borrow

Who are the preferred financing partners of Swiss municipalities? And why are online platforms also becoming increasingly interesting for investors? In the second part of our blog series, we take a closer look at these aspects and let economist Prof. Christoph Lengwiler have his say.

Since 2003, the Lucerne School of Business has regularly examined the financing structure of medium-sized municipalities in Switzerland – most recently in 2019. In the study published this summer, it concludes that the market has changed significantly in recent years.

With whom?

Especially with regard to financing partners, there is movement. With 51.3 percent of the recorded credit volume, banks are still the most important partner of the municipalities, but the market share is almost 11 percent lower than in the 2016 study. On the other hand, pension funds seem to be becoming an increasingly attractive financing partner: They are recording an increase of a good 10 percent. Almost half of the credit volume is thus no longer financed by banks.

But the weighting has also shifted within the banks. PostFinance and the Raiffeisen banks have maintained their position in the market compared to the previous study, but the cantonal banks and the other banks (UBS, CS, etc.) recorded lower market shares at the end of 2019. The same applies to insurance companies, which have almost completely withdrawn from the market in recent years. Obviously, municipal financing, although highly rated in terms of creditworthiness, is not attractive enough due to the low margins.

Mediation platforms are used more often

And what about alternatives to the classic loan brokerage via the house bank advisor? According to the study, more than half of the surveyed municipalities (60%) now work with service providers such as loan brokerage platforms or brokers. In 2016, it was only just over 41 per cent. But the platforms are not only attractive for borrowers, says study leader Prof. Dr. Christoph Lengwiler, but also for potential investors.

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Quality before quantity

A certain consistency seems to be important to the municipal finance directors: The number of brokers and platforms used by the municipalities decreased compared to the last study. This is evidence of a concentration on certain service providers. In the ranking of which service providers the municipalities use for their loan requests, Loanboox takes second place with 33% after only three years in the market.

Details about the study and the participants

In 2003, the Institute of Financial Services Zug (IFZ) at the Lucerne School of Business, under the direction of Prof. Dr. Christoph Lengwiler, conducted its first survey of the financing market for medium-sized municipalities in Switzerland. The study has been conducted six times since then – most recently at the end of 2019. The focus is on municipalities with 4,000 to 30,000 inhabitants. In the most recent study, a total of 470 municipalities were requested and 238 provided their data – this corresponds to just under eleven percent of all municipalities in Switzerland. With a participation rate of 50.6%, the survey can be considered largely representative. For the first time, Western Switzerland was also included, which is reflected in the credit volume with an increase of almost 30% compared to the 2016 study.

Read also part 1 of the blog series on municipal financing in Switzerland.

Study on community financing in Switzerland. Part 1: These are the main trends

by | Dec 2, 2020 | Borrow

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How does community financing work in Switzerland? Which financing models and maturities are attractive? And how has financing behaviour changed overall? The Lucerne University of Applied Sciences and Arts wanted answers to this question and has conducted an extensive study on the subject. You can find out the answers in our three-part blog series.

For the sixth time, the Lucerne University of Applied Sciences and Arts presented the results of a study on municipal financing in medium-sized Swiss municipalities in August 2020. The study is based on data from 238 municipalities with a credit volume of CHF 6.2 billion.

The most important results at a glance

  • Municipalities mainly take out long-term loans
  • Fixed-rate loans dominate with a share of 89%
  • Banks remain most important financing partners, but pension funds and institutional investors are catching up
  • Volume of short-term fixed advances has declined again
  • Average interest rate has reduced further.

The study shows that the market is continuously in motion – but the changes are often to be found in small things. Let’s take a closer look at the types of financing.

Fixed-rate loans remain the most attractive type of financing for Swiss municipalities. They clearly dominate with a share of 89% of the total loan volume and increased by another 5% percent compared to the 2016 study. The average interest rate on loans is 0.74%, compared to 1.2% in the study three years ago. Prof. Dr. Christoph Lengwiler, head of the study, explains in detail what effects the extremely low interest rate level has on municipal financing:

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He assumes that the low interest rate will not change in the coming months, Christoph Lengwiler continues. This is very advantageous for the municipalities. For a medium- or long-term prognosis, however, one must first wait and see how things develop.

Maturities: The longer – the better

Interessant ist auch ein Blick auf die Laufzeiten der Kredite: Über die Hälfte weist dabei eine Laufzeit von 10 oder mehr Jahren auf – ein weiterer Trend, der sich seit der ersten Studie stetig fortgesetzt hat. Doch wen bevorzugen die Gemeinden als Finanzierungspartner? Und wie häufig nutzen Sie für Kreditanfragen digitale Vermittlungsplattformen? Darum geht es in Teil 2 unserer Blogreihe zur Gemeindefinanzierung in der Schweiz.

Details about the study and the participants

In 2003, the Institute of Financial Services Zug (IFZ) at the Lucerne School of Business, under the direction of Prof. Dr. Christoph Lengwiler, conducted its first survey of the financing market for medium-sized municipalities in Switzerland. The study has been conducted six times since then – most recently at the end of 2019. The focus is on municipalities with 4,000 to 30,000 inhabitants. In the most recent study, a total of 470 municipalities were requested and 238 provided their data – this corresponds to just under eleven percent of all municipalities in Switzerland. With a participation rate of 50.6%, the survey can be considered largely representative. For the first time, Western Switzerland was also included, which is reflected in the credit volume with an increase of almost 30% compared to the 2016 study.

The vaccine and the capital markets

The vaccine and the capital markets

by | Nov 26, 2020 | Borrow

Everything will be fine, one might say in view of the hopeful news about Covid19 vaccines that will soon be available. And at least the financial markets agree with this credo. But is this just a snapshot or already a signal for a synchronised global upswing?

The announcement that several vaccines against the virus could be approved before the end of this year has not only caused the prices of the respective pharmaceutical companies to soar, but also boosted the stock markets in general. Although many details – such as the distribution of the vaccines – have not yet been clarified, the upswing on the markets is virtually anticipated. This applies both to the development of the real economy and to the opportunities on the capital markets. Investors worldwide are optimistic. The question, however, is: What factors can influence this development? And at what starting point do we actually stand?

Corona is still omnipresent

The macroeconomic backdrop is certainly more constructive at present than it was in the summer or even in the spring. Although the second wave of infection has been rolling for weeks, it has not hit the economy that hard so far. This is partly because governments in Europe have so far tried to avoid a complete lock-down. The international movement of goods, for example, is largely unhindered – that was not the case during the first wave. On the other hand, people have learned from the experience of the crisis in the spring, which creates a better basis in many respects. That is the good news.

Uncertainty factor USA

But the Covid19 infection figures in most countries are still rising or at least stagnating at a high level. The US is fighting a third wave, and if there were to be new lockdowns, this would certainly result in weaker economic activity. In addition, an agreement in Congress on the support programme so urgently needed by the economy is not yet in sight – this also plays a major role in the development of the financial markets worldwide.

Power forecast with small blemishes

This rather ambivalent situation makes an exact prognosis difficult, but nevertheless: the announcement of the vaccines and the hope for an early return to normality is a euphoric signal. Even renewed economic setbacks caused by Corona – according to the calculations of many financial experts – could be quickly offset once widespread vaccination begins. They expect GDP in the eurozone to return to pre-Corona levels by the end of 2022. The capacity for a rapid economic recovery has already been demonstrated this summer, they say.

Investors are keeping an eye on this development. It is wise to start thinking about the post-pandemic period now. 

You want to invest now? Find out about safe investment opportunities on Loanboox.

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Netzwoche: How fintechs and banks collaborate

by | Nov 12, 2020 | Borrow

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FinTechs versus banks – the public likes the image of the small, innovative David against the big, ponderous Goliath. What is often disregarded in the process: the customer benefit. In Netzwoche magazine, we explain why cooperations with institutional partners like banks are important and useful. 

Many banks, insurance companies and businesses want to become more customer-oriented, efficient and agile. But structures that have evolved over decades and internal regulations do not exactly make this development process easy. It is important for clients, especially in difficult times like these, to find efficient financing options that can also be easily operated from the home office.

The market for such partnerships is there

For our COO Dominique Hügli, the advantages were therefore obvious when, for example, the opportunity arose to cooperate with Deutsche Kreditbank (DKB). Through the cooperation, both sides want to drive the digitalisation process in the financial sector and better exploit the existing market potential.

Digital transformations and joint projects like these are always a challenge as well. It is important that everyone is brought on board, believes in the joint product or service and consistently follows the underlying strategy.

Dominique Hügli, COO von Loanboox

At the end of the process, with the “Direktdarlehen”, there is a digital product with which everyone is happy – especially the customer. Even more: the cooperation with DKB shows that it is worth expanding the portfolio for further strategic partnerships.

Interesting topic? Then read the whole article in Netzwoche magazine.

Get more offers and 25% discount on exclusive deals until 31.12.2020

Get more offers and 25% discount on exclusive deals until 31.12.2020

by | Nov 3, 2020 | Borrow

We have analyzed over 2000 financing requests and found that exclusive deals generated superior results for borrowers. On average, municipalities and organisations who post their financing requests exclusively via Loanboox get twice as many competitive offers compared to their peers who used several channels. The higher number of offers reflects in increased competition which ultimately results in better rates for you as borrower. 

To give you a better idea, have a look at a couple of recently closed exclusive deals below:

A Swiss municipality with 3’700 inhabitants received 17 competitive offers (including offers from local banks). The municipality concluded for 0% for 4 years which was 0.3% better than in the past allowing the municipality to save several thousand CHF per year.

A power plant in Switzerland received 8 competitive offers from investors in Switzerland and Europe. The power plant concluded at 0.78% for 8 years and at 1.25% for 12 years saving several ten thousand CHF per year compared to earlier financing terms.

BEAT ZURBUCHEN

Financial Director, Municipality of Matten (BE)

“I have used Loanboox exclusively and received more than 15 attractive offers. The integrated automatic comparison saves me a lot of time and the more attractive offers save the taxpayers of Matten money.“

Apart from getting the best rates, those borrowers experienced an efficient process and were able to compare offers intuitively. As a nice side-effect, they of course also got seamless, audit-proof documentation of the whole process.

To sum it up, data and our experience clearly show that exclusive requests lead to:

  • less effort needed and time saving since all offers are compared automatically in the same placea
  • twice as many offers since investors haven’t received the offers through other channels
  • … resulting in: Lower rates due to efficiency gains and increased competition

To make it even more attractive, we have a time-limited offer for you until the end of 2020: Put your financing request exclusively on Loanboox, and you will benefit from better deals and an additional 25% discount on the Loanboox transaction fees.

Sounds interesting? Login to start your financing request while choosing “Exclusive request” as financing object.

PUBLISH EXCLUSIVE REQUEST

More info needed? Call us (055 220 78 20), chat with us or write an email. We are always happy to help. 

Treasury Management International: Energy firm offers first ever entirely digitally-issued corporate bond

by | Sep 24, 2020 | Borrow, Invest

Digitalisation comes to the corporate bond market as Swiss energy firm Axpo makes the first ever fully electronic issuance. The magazine treasury management international has written an article about the recently closed bond.

Switzerland-based energy group, Axpo Holding AG has become the first ever issuer of an entirely digital issuance of a corporate bond. Using the independent debt capital market platform, Loanboox, the issuance, it says, marks the first step towards digitalisation and new standards in transparency, pricing and allocation in the primary capital markets. 

Axpo’s seven-year green bond was over-subscribed, raising CHF133m (c.€123.4m). Some 35 orders were allocated to a range of institutional investors via the Loanboox platform in the 90-minute book-building window. The bond, which has a coupon of 1.002%, is listed on the SIX Swiss Exchange. Axpo will use the capital to finance projects in the photovoltaic and wind energy sectors.

Why digital?

[…] In the non-digital world, the lead bank calls potential investors for orders, but pricing is akin to a “black box” for them, and they may only get one chance to change their order, Bühler notes.

“Live book-building allows both parties to see the price developing; it’s much more like an open marketplace.”

With Axpo opting for green bond issuance, the transparency afforded by the platform correlates well with the compliance needs of ESG-driven investors, says Bühler. With both sides able to see all details of the issue in advance of the book-building day, oversight of the whole transaction is now possible.

 

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