MNI China Daily Summary: Monday, January 27

MNI BRIEF: China Industrial Profits Up 11.0% In December

MNI: China CFETS Yuan Index Down 0.45% In Week of Jan 24

MNI NBH WATCH: Base Rate To Hold At 6.5% Despite Price Uptick

MNI: PBOC Sets Yuan Parity Lower At 7.1698 Mon; -1.06% Y/

MNI: PBOC Net Injects CNY175 Bln via OMO Monday

EZ/UK T-Bill Calendar: 3/6-Month ATB Auction on Tuesday

EZ/UK Bond Supply Calendar: Austria Synd, NE, IT, UK, DE Tues

MNI: US DEC NEW HOME SALES +3.6% TO 0.698M SAAR

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

© 1982-2025 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

FINANCIALS: Aareal Bank - New Issue - $400m PerpNC5.5 AT1 - FV

FINANCIALS
Credit BulletsCEEMEAEurozoneGermanyBullet

Aareal Bank - New Issue - $400m PerpNC5.5 AT1

  • IPT: 10%
  • FV: 10-10.5% When we look at names like SocGen 8.125% Perp yielding 8.9% and DB 8.125% Perp yielding 7.2% in EUR (add c. 2% for the USD swap) which are 2 notches higher rated at Fitch we struggle to put Aareal bank close to these names in spread. With significant European and US real estate risk, Aareal has often been grouped with PBBGR whose EUR AT1 is yielding 11% to maturity (c.13% swapped into USD). While risk exposures for the banks are somewhat similar, Aareal size, better opinc ratios and recently improved Impaired loan ratios means they should be a more resilient business - despite higher ongoing loan loss rates than PBBGR - who are rightly rated significantly lower. In Sr Non-Preferred space DB and SocGen trade (70-80bps) well inside AARB - so one would think this should translate into a wider gap at AT1. We therefore can't justify a FV inside the IPT. If you like this credit, and believe the bank will be able to weather the CRE loan losses, then this bond makes sense - if not, it does not. We believe we have not seen sufficient data on the US real estate market to indicate the long term oversupply in US CRE has ended.
  • Exp. Ratings: BB- (Fitch)

 

220 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

Aareal Bank - New Issue - $400m PerpNC5.5 AT1

  • IPT: 10%
  • FV: 10-10.5% When we look at names like SocGen 8.125% Perp yielding 8.9% and DB 8.125% Perp yielding 7.2% in EUR (add c. 2% for the USD swap) which are 2 notches higher rated at Fitch we struggle to put Aareal bank close to these names in spread. With significant European and US real estate risk, Aareal has often been grouped with PBBGR whose EUR AT1 is yielding 11% to maturity (c.13% swapped into USD). While risk exposures for the banks are somewhat similar, Aareal size, better opinc ratios and recently improved Impaired loan ratios means they should be a more resilient business - despite higher ongoing loan loss rates than PBBGR - who are rightly rated significantly lower. In Sr Non-Preferred space DB and SocGen trade (70-80bps) well inside AARB - so one would think this should translate into a wider gap at AT1. We therefore can't justify a FV inside the IPT. If you like this credit, and believe the bank will be able to weather the CRE loan losses, then this bond makes sense - if not, it does not. We believe we have not seen sufficient data on the US real estate market to indicate the long term oversupply in US CRE has ended.
  • Exp. Ratings: BB- (Fitch)