Companies may issue $1.5 trillion of US bonds in 2025

Corporations have issued more than $1.4 trillion of investment-grade US bonds and have broken four monthly issuance records in 2024, putting them on track for the second-busiest year ever. Company bond issuance is also expected to rise in 2025, according to John Sales, head of Investment Grade Syndicate in the Americas in Global Banking & Markets, Goldman Sachs.

For corporate borrowers, the extra yield (or spread) they pay relative to Treasury bonds has seldom been lower. “That's a big reason why folks are jumping to lock in the current rates,” Sales says. 

US investment-grade bond sales linked to M&A are on track for their highest volume since 2019. Those transactions have been boosted by deals in the energy, healthcare, and consumer sectors, Sales says.

Issuance from utility companies has also surged amid capital expenditures to support power demand from data centres and electrification. Offerings from that sector have risen 18% this year compared with the same period in 2023 (as of October 10).

When it comes to the economy, investors’ focus has moved from inflation, which is cooling, to the outlook for growth. Economists in Goldman Sachs Research recently lowered their probability forecast for a US recession in the next 12 months to 15%. 

Put another way, growth is a primary reason the $1.4 trillion of corporate bond sales outpaced expectations this year, according to Sales: “You're seeing growth in the economy. You're seeing growth in corporate America. You're seeing growth of the balance sheet. And as companies grow, they issue debt to finance that growth.”

 

ESG sukuk growth to be sustained through 2025

Global ESG sukuk issuance is expected to continue rising over Q4 2024 and 2025, driven by investor demand, funding and diversification goals, and government sustainability initiatives in some Muslim-majority countries, Fitch Ratings says.

The expected US Federal Reserve rate cuts to 4.5% at end-2024 and 3.5% at end-2025 could further improve financing conditions and support issuances.

“ESG sukuk issuance is on a promising upward trajectory, with sukuk becoming a key ESG funding tool in emerging markets (EM),” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. “We expect ESG sukuk to exceed $50bn by 2025, with favourable financing conditions anticipated and sound credit, with 99% of Fitch-rated ESG sukuk being investment-grade. However, challenges remain, including a weakening sustainability drive, sharia-compliance complexities, geopolitical risks and oil volatilities.”

Sukuk were 17.2% of all ESG debt issued in EM (excluding China) in the first nine months of 2024 (US dollar only). Also, 40% of all ESG bonds and sukuk in EM (outside China) were issued by the core Islamic finance markets – a share that Fitch expects to rise.

Demand from ESG-sensitive international investors could help plug the funding gap for longer tenors. A recent example is the Indonesian sovereign sukuk (BBB). The 30-year green sukuk tranche attracted 90% investors from Europe, the US and Asia (excluding Malaysia and Indonesia), with more than 85% coming from non-bank investors. Middle Eastern and Malaysian investors contributed only 9% to the 30-year green sukuk tranche, but over 50% for the five-year and 10-year non-green sukuk tranches.

ESG-sukuk were only 5% of global sukuk outstanding, but had expanded 34% yoy to US$44.6bn outstanding at the end of Q3 2024 (all currencies), outpacing the global sukuk growth (8.7%). Among the GCC countries, ESG debt reached US$46.3bn outstanding, with 42% in sukuk.

 

ICC joins SME Resilience Alliance for Ukraine

ICC has joined the SME Resilience Alliance for Ukraine and took part in the Alliance’s second meeting, on 29 October, 2024. Launched at the Ukraine Recovery Conference in Berlin in June, the Alliance aims to improve regulations, enhancing support, and increasing access to finance for SMEs to aid Ukraine’s recovery.

In addition to Ukraine, the Alliance currently comprises 12 countries, plus the European Union, as well as several international organisations and development finance institutions – including the EBRD, OECD, and the World Bank – all working together to strengthen the resilience of small- and medium-sized enterprises (SMEs) in Ukraine.

The SME Alliance for Ukraine aims to support the Ukrainian government’s efforts through three key areas: improving regulatory framework conditions, strengthening support institutions for SMEs and enhancing access to finance. Pursuing the goal of mobilising €7bn for ongoing and new SME programmes, the Alliance has mapped relevant actors in Ukraine and abroad. This allows for the identification of regional as well as sectoral gaps and overlaps in support, and facilitates the linking of potential trading partners. Most SME beneficiaries in Ukraine operate in the agri-food sector, and a large share is owned by women.

Through its participation in the Alliance, ICC seeks to extend its ongoing efforts to strengthen Ukraine’s economy. ICC has previously been actively engaged in several key initiatives, including the Black Sea Grain Initiative, which has facilitated the export of nearly 33 million tonnes of grain.

Additionally, the ICC Centre of Entrepreneurship in Ukraine is working to empower Ukrainian SMEs and assist the re-skilling of internally displace people, notably women. ICC also maintains regular consultations with multilateral donors and individual contributors to explore strategies for economic reconstruction. This includes engaging with the Ukraine Donor Platform and its Business Advisory Council.

 

Barclays completes acquisition of Tesco’s retail banking business 

Barclays has announced that, further to the announcement on 9 February 2024, Barclays Bank UK PLC (Barclays UK) has successfully completed the acquisition of the retail banking business of Tesco Personal Finance plc (TPF, operating using the trading name Tesco Bank). The acquired business includes credit cards, unsecured personal loans, deposits and the operating infrastructure which, following completion of the acquisition, will continue to be operated under the ownership and management of Barclays UK.

In conjunction with the completion of the acquisition, Barclays UK has entered into a long-term, exclusive strategic partnership with Tesco Stores Limited for an initial period of 10 years to market and distribute credit cards, unsecured personal loans and deposits using the Tesco brand, as well as explore other opportunities to offer financial services to Tesco customers through Tesco's distribution channels and on the open market.

This partnership builds on Barclays UK’s existing strategic partnerships with other leading UK retail, consumer electronics and loyalty programme brands. Following completion of the transaction, the business will continue to operate under the “Tesco Bank” brand, under the management of Barclays UK.

 

Fifth Third and CRF launch fund for SMEs

Fifth Third Bank has partnered with Community Reinvestment Fund, USA (CRF) to launch the Small Business Catalyst Fund, a $7.85m investment to support small businesses across the bank’s footprint of 11 US states to grow and create jobs in their communities and build a more equitable small business ecosystem.

The fund connects small business owners to potential capital options offered by trusted Community Development Financial Institutions (CDFIs). The program will use a funding model that combines grants, micro-loans and small business loans.

Guided by the local communities they serve, CDFIs are mission-driven community lenders and resource providers that often work with entrepreneurs who have historically faced roadblocks along their journey to secure capital and other resources.

The Small Business Catalyst Fund will provide an alternative to help small and micro business owners obtain working capital when traditional lending is not an option. The fund will provide grants, micro loans and small business loans ranging from $5,000 to $750,000 to small businesses at various stages of maturity.

 

Fulton names new CFO

Fulton Financial Corporation (Fulton) has announced that Richard Kraemer has been appointed as Senior Executive Vice President and Chief Financial Officer (CFO), replacing Interim CFO Betsy Chivinski, who is retiring from Fulton at the end of the year.

Kraemer will oversee accounting, treasury, corporate development, tax, financial planning and forecasting, investor relations, procurement and real estate.

Kraemer has more than 20 years in the financial services industry, having most recently served as Chief Banking Officer overseeing commercial markets for another bank. In that role, he had profit and loss responsibility for the bank's commercial business. Prior to that, he served as Executive Vice President, Deputy Chief Financial Officer and Treasurer. In that role, he was responsible for leading all aspects of corporate treasury and corporate finance for the more than $60bn in assets company.