Driven by rising interest rates, DAX corporations have managed to reduce their net financial debt by 22% since the zero-interest phase ended in 2022. According to a report published by the “Handelsblatt”, which analyzed corporate balance sheets and data from Bloomberg, the debt ratio of these companies has consequently fallen from 30.8% to 19.8%.
In the same period, the equity of DAX companies increased by 21%, reaching a record high of €991 billion. Note that financial service providers were excluded from the survey because their key metrics are not comparable to the other corporations.
The shift in lending conditions is notable: the European Central Bank raised its key interest rate by 0.25 percentage points to 2.5% on Thursday. Financial markets anticipate three further interest rate increases through 2027. Meanwhile, the average interest rate for new bank loans has risen to 3.8% (up from 3.2% a year ago), and yields on good and medium-grade bonds jumped from 3.5% to 4.0% during the same timeframe.
However, the financial burden is not distributed uniformly. The analysis indicates that Bayer, Eon, RWE, BASF, and Continental face the least favorable ratio of debt to operating result. In an effort to increase its financial flexibility, Bayer successfully secured €3 billion in fresh capital through an investment deal with the US investor Apollo.
While Deutsche Telekom holds the highest absolute debt load at €132 billion and recently paid €6.5 billion in interest, it is able to absorb the cost due to an operating result of €24.8 billion. Furthermore, eleven DAX corporations-including BMW, Mercedes-Benz, Volkswagen, and Beiersdorf-have more liquid assets than outstanding debt.
