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FINANCIALS: Financials On Friday: Positive

FINANCIALS
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Bank spreads were 2.5bp tighter on the week, some clawback of the risk-off events of the week prior, French and high-beta banks leading. Insurers tightened by around 1bp with little dispersion amongst the larger issuers. Three points to cover this week:

  • Animal spirits:  flurry of deal news but generally small aside from Aareal’s bumper sale of its tech platform (Aareon) for roughly the entire market cap of group. This is set to double CET1 so a spread positive event, we feel and it was the week’s best performer.
    • Other deals: Citi selling in Poland, Unicredit buying in Estonia, Phoenix selling a product line and Zurich extending one.
  • Results season upcoming, with a positive early indicator: Jefferies results beat expectations, positive for the equity-linked banks (Morgan Stanley, UBS). 
    • The main bulk of results season starts on 12-June and previews will be forthcoming in the next week
  • Regulatory news also broadly positive: 
    • BoE's FSR  indicated a resilient system and noted that borrowers are dealing with rate stress well - apparently more postive than last review. It did elevate two risk factors to the headlines:asset prices have continued to rise and the term “sharp correction” was elevated  and shadow banking warnings. SWES round 2 results due Dec-24.
      • CCyB was kept at the neutral 2% point. This contrasts with Spain, which is considering raising it, to the ire of local banks there, and Czechia which has just cut it.
    • FRTB was in the news again. Under intense lobbying pressure, US regulators are now looking to push this to 2026, which has, in turn, put pressure on the EU to do the same. However, the Swiss are playing hardball. We take this increased capital requirement (only 2-4% at group level, we estimate) as a credit positive for UBS spreads.
       
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Bank spreads were 2.5bp tighter on the week, some clawback of the risk-off events of the week prior, French and high-beta banks leading. Insurers tightened by around 1bp with little dispersion amongst the larger issuers. Three points to cover this week:

  • Animal spirits:  flurry of deal news but generally small aside from Aareal’s bumper sale of its tech platform (Aareon) for roughly the entire market cap of group. This is set to double CET1 so a spread positive event, we feel and it was the week’s best performer.
    • Other deals: Citi selling in Poland, Unicredit buying in Estonia, Phoenix selling a product line and Zurich extending one.
  • Results season upcoming, with a positive early indicator: Jefferies results beat expectations, positive for the equity-linked banks (Morgan Stanley, UBS). 
    • The main bulk of results season starts on 12-June and previews will be forthcoming in the next week
  • Regulatory news also broadly positive: 
    • BoE's FSR  indicated a resilient system and noted that borrowers are dealing with rate stress well - apparently more postive than last review. It did elevate two risk factors to the headlines:asset prices have continued to rise and the term “sharp correction” was elevated  and shadow banking warnings. SWES round 2 results due Dec-24.
      • CCyB was kept at the neutral 2% point. This contrasts with Spain, which is considering raising it, to the ire of local banks there, and Czechia which has just cut it.
    • FRTB was in the news again. Under intense lobbying pressure, US regulators are now looking to push this to 2026, which has, in turn, put pressure on the EU to do the same. However, the Swiss are playing hardball. We take this increased capital requirement (only 2-4% at group level, we estimate) as a credit positive for UBS spreads.