“This feeling of optimism is reflected in the region generally with plans for growth moving ahead and GDP expected to continue to increase in the coming year,” said James Babb, partner and CFO Program Leader for Deloitte. “This positive climate is being supported by strong spending on infrastructure development from the region's governments, underpinned by resilient oil prices.”
CFOs are now significantly less risk averse than any time in the past year. A net balance of 43 percent think now is a good time to take greater risk onto their balance sheets, compared to 36 percent in Q1 2010 and 27 percent in Q3 2009. Additionally, companies are not planning to reduce spending and investment as aggressively as they did in the previous quarters.
The latest global CFO survey shows that CFOs have become much more positive about debt levels and their debt repayment ability. Only a net balance of 29 percent of CFOs now think Middle Eastern companies are overleveraged compared to 42 percent in Q1 2010.
Despite a slight fall, bank borrowing continues to be the most attractive source of financing for CFOs. A net balance of 41 percent rate bank borrowing as attractive compared to 28 percent for equity issuance and 26 percent for corporate bond issuance. There has been a sharp rise in the attractiveness of the latter, increasing from net 10 percent to net 26 percent.
A majority of the CFOs are planning to take on more debt. Two thirds of CFOs plan to raise financial leverage over the next 12 months and are likely to issue debt or arrange new facilities in the coming year.
The majority of CFOs are positive on mergers and acquisitions (M&A) in the next 12 months, but this majority has shrunk since last year. 61 percent of CFOs now expect M&A activity to increase in the next 12 months, compared to 71 percent one year ago. Almost a quarter of respondents are considering M&A activity over the next 12 months, with 23 percent considering a strategic alliance and 21 percent considering a joint venture.
