FINANCIALS
Banks had a relatively strong first full week of the year amidst a swathe of supply. French banks performed particularly well as a decent valuation and slowing negative headlines combined. We looked at French banks in early December, highlighting the valuation opportunity that was being created. https://mni.marketnews.com/3DZa7BK . The best performer was Deutsche Pfandbriefbank, also on the back of little new news and a compelling valuation. On the other hand, with a significant negative sentiment around the UK, and with Fitch warning of increased non-conforming mortgage delinquencies, https://mni.marketnews.com/4h51WCe , UK banks performed particularly poorly.
- Issuance kicked off with a bang. New issues generally came with moderate but positive new issue premiums and attracted very significant book sizes. There didn’t seem significant premium for green or social bonds, which priced in line with their non ESG counterparts.
- French banks were particularly active in the tier 2 space. With BPCE, BNP (in £ and €) and BFCM all issuing. We noted that the French bank tier 2 curve looks quite steep. https://mni.marketnews.com/3Cf2uXn. The BPCE Tier 2 had the highest cover of the week, with the €750m raised seeing order books 8.3x as large. Generali also issued their longest € T2's which we thought contained meaningful new issue premium.
- BBVA issued a $ AT1 at 7.75% with the lowest ever recorded spread by a southern European bank at+325bps, which was -25bps through our FV estimate and currently a little below par. AIB also came with an AT1 in EUR, printing at 6%.
- The most popular category was sr non-preferred which saw NWIDE, SCOGEN, CMZB, BNP, BPER, UCGIM & BACR* all come to market. DANBK and BYLAND issued Sr Preferred. (*Snr Holdco)
- Jefferies also reported very decent set up full year results, although are not fully comparable to the upcoming US bank results as they only run to Nov 30th. https://mni.marketnews.com/40bXj2t
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