CFOs show a little optimism
FINANCE professionals are showing signs of optimism despite the continuing economic turmoil, according to Deloitte.
The business advisory firm’s latest survey of chief financial officers (CFO) and group finance directors reveals tentative signs of improvement – although the overwhelming majority of those questioned still rate credit as expensive and hard to obtain.
Chris Powell, Deloitte partner and head of the Leeds audit practice said that overall credit pricing and availability had improved slightly.
Moreover, while the majority of CFOs remained negative on the financial outlook for their businesses, sentiment had picked up from the extreme lows seen in the second half of 2008.
“This quarter’s survey is certainly downbeat, but it does point to a marginally improved situation compared to the second half of 2008,” he added.
However, the report found that although base rate cuts had reduced borrowing costs on corporate debt most CFOs through government action so far has had little or no effect on the availability or cost of new credit.
Improvements in price and credit flow are not expected until 2010 or later.
More than 80% said that they planned to reduce employee numbers while 30% have already or plan to reduce dividend payments – a 10-fold increase on last year.
But Mr Powell remains positive.
“Lower interest rates are starting to feed through to the corporate sector, at least for existing borrowing,” he said.
“Sixty four per cent of CFOs report that lower base rates have been effective in reducing interest rates on existing bank borrowing.”
Ian Stewart, chief economist for Deloitte said that the balance of opinion among CFos about prospects for debt or equity insurance now stood at its highest levels since the survey started in 2007.
“Absolute levels of sentiment here remain low, but less so than for some time,” he continued.
“The survey shows, in particular, a growing willingness to contemplate equity issuance. In September 2008, just 4% of CFOs felt it was a good time to issue equity. By March 2009 this had risen to 25%.”
