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Financials on Friday: Animal Spirits

FINANCIALS
  • Animal spirits: the starter. In January, we had UniCredit’s CEO denying any interest in BP Sondrio and, conversely, we hear from compatriot insurer and key network node, Generali, that it is willing to look at deals to power growth.
  • Animal spirits: the main course. Aviva buys Lloyds’ market operator, Probitas for GBP242m. Greece sells its entire 27% stake in Piraeus for EUR1.35bn in a heavily subscribed international offer. Finally, Nationwide buys Virgin Money in the UK for GBP2.9bn in cash, further consolidating the UK banking market.
  • Animal spirits: the dessert. Target company credit tends to tighten (certainly at VMUK), and this is indicative of both owners and management teams seeing credit quality holding up well so being willing to bear execution risk. Tells us something of what those at the sharp end are thinking.
  • Insurance updates: Aviva results were inline with expectations, Hiscox’s were good with a stronger outlook and Sampo’s new targets weren’t ground-breaking. Little to move spreads in here.
  • Bank updates: Avanza continues its growth charge in Sweden and Eurobank results were better on credit quality which underlines the rationale behind the successful Piraeus sale. Allied Irish beat on credit quality, too and upped the equity payout.
  • Credit quality: DePfa results were far from the disaster some were pricing in, and it indicated it likely would pay the April coupon on its AT1 bond. That bond rallied over 10points on the day. Peer Aareal Bank and compatriot heavyweight Deutsche Bank saw positive price action, too.
  • NYC Bancorp: raised USD1bn from three investors to shore up its balance sheet (half from Steve Mnuchin’s firm) and saw Moody’s upgrade outlook to positive (from negative).
  • Primary: a major wave of issuance across rankings (including RT1, T2, SP and SNP), geographies (incl. Swedish, Dutch, Spanish, Italian issuers) and currencies (incl. EUR, GBP, USD even JPY). Mostly priced in line with expectations as demand appears strong.
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