In earlier panels at the Germany Forum 2016 in Munich, speakers had expressed scepticism about the German private debt opportunity – claiming it was hard to compete with domestic banks lending at wafer thin margins.
However, Nicolaus Loos, managing director at IKB Deutsche Industriebank, said that three common myths – that non-bank lending to German corporates is almost impossible, that margins will be too low, and that accessing the Mittelstand is extremely tough – were all false.
He said that demand will be very strong due to huge growth in the German mid-market as companies seek to globalise. The industrial nature of many of these firms means they need high capital expenditure. While at the moment he conceded it was tough to compete with the Landesbanks, he questioned how long it would be before their approach to lending proved unsustainable.
He added that, perhaps contrary to perception, Germany has seen the same trend of disintermediation as the rest of Europe. According to data sourced from the ECB, Bundesbank and Consob, around €1 trillion has been wiped from German banks' balance sheets since 2012 and the number of banks has been steadily reducing with further consolidation to come.
He hailed the potential of the market given that deals by alternative lenders in Germany are very low relative to GDP. Yet Germany has a track record of solid returns and exceptionally low default rates.
He also stressed that it was possible to access the Mittelstand provided you focused on building deep local networks with banks, advisers and joint venture partners while also having local offices.
Loos appeared to refer to a fourth myth about Germany winning football's European Championship, before saying that this was in fact true. We will leave it to the reader to decide whether this in any way compromises his credibility.