After a long period of difficulty for the regional loan market, there are at last signs that activity is beginning to pick up again. In April alone, about $5bn of loan deals should be arranged - already more than in the whole of the first three months of 2010.

It is a sign that an appetite for risk is returning after about six months of disillusion. Bankers say the progress on a deal to sort out Dubai World’s debt problems are helping improve sentiment in credit committees in head offices in New York, Paris and London. A slow return to economic growth, after a difficult 2009, is also boosting confidence.

Corporates who have sat on the sidelines because of the high prices demanded by banks are looking to return to the market, now that interest costs are falling. The loan market has also been buoyed by problems in the bond market. Sovereign debt issues of Dubai and Greece made International Petroleum Investment Corporation drop bond plans earlier in the year and ask its banks for fresh funding.

So far though, banks are interested in lending to government-backed firms, with whom they have established relations. If more defaults can be avoided, momentum should pick up to allow privately-owned businesses access to funding later in the year. But still only for those companies with a proven business model.

Activity levels are unlikely to return to the heady days of 2007, when total loans was about $100bn

However, activity levels are unlikely to return to the heady days of 2007, when total syndicated loans was about $100bn. Most corporates are now scaling back expenditure and deleveraging. In 2009, about $40bn of deals were completed. Businesses are increasingly diversifying funding sources, with more looking at the bond market, even if timing issues mean they do not always complete an issue.

Banks are looking for ways to deploy their capital as they put the worst of the financial crisis behind them. The difficulty may be finding enough good opportunities.