IFR International - 28.07.2018

4HEû'ERMANûLENDER ûINûBLACKOUTûPRIORûTOû
reporting second-quarter results last
7EDNESDAY ûISûSEENûASûAûPRIMEûCANDIDATEûTOû
open this market after legislation
PERMITTINGûISSUANCEûCAMEûINTOûFORCEûOVERû
the weekend.
h)Fû)ûWEREûTHEM û)ûWOULDûJUSTûBANGûOUTûAû
PREFERREDûSENIORûNOW vûSAIDûONEûSYNDICATEû
OFlCIAL
h4HEYVEûACTUALLYûHADûSOMEûHALF
DECENTû
RESULTSûFORûONCE ûTHEYVEûHADûQUESTIONSû
around market access for the last couple of
YEARS ûSOûYOUDûWANTûTOûGOûOUTûANDûMAKEûAû
STATEMENTûANDûDOûAûBIGûDECENTûTRADEv
$EUTSCHEûPOSTEDûAûûDROPûINûNETûPROlTû
INûTHEûSECONDûQUARTERûFROMûAûYEARûEARLIER ûTOû
õMûFROMûõM ûBUTûPROlTûANDûREVENUEû
WEREûBOTHûBETTERûTHANûEXPECTEDûASûITûTRIESûTOû
BOUNCEûBACKûFROMûTHREEûCONSECUTIVEûYEARSûOFû
losses.
'ERMANYSûSOLUTIONûTOûHELPûITSûLENDERSû
comply with loss-absorbing regulation was
to subordinate outstanding senior
unsecured bonds to other senior liabilities in
the hierarchy of claims after a bank failure.
4HOSEûCHANGES ûEFFECTIVEûFROMû û
applied not only to all new issuance but also
the banks’ entire stock of senior unsecured
bonds. Deutsche Bank reported a Total Loss-
!BSORBINGû#APACITYûOFûõBNûLASTû
7EDNESDAY ûõBNûANDûõBNûOVERûITSû
RESPECTIVEû-2%,ûANDû4,!#ûREQUIREMENTS
(OWEVER ûWHATûINITIALLYûAPPEAREDûTOûBEûAû
SHREWDûMOVEûBACKlREDûASûOTHERû%UROPEANû
countries ensured their banks had the
option of issuing preferred senior alongside
THEûNEW ûCOSTLIERûNON
PREFERREDûSENIORû
Preferred senior bondholders would only
SUFFERûLOSSESûAFTERûLOWER
RANKEDûCREDITORS ûSOû
the asset class trades at a tighter spread.
The opportunity to issue a cheaper form
OFûSENIORûDEBTûISûPARTICULARLYûVALUABLEûFORû
$EUTSCHEû"ANK ûGIVENûITSûFUNDINGûCOSTSûHAVEû
shot up as it undergoes a painful
restructuring.
)TSûõBNûûSENIORûDUEû*ANUARYûû
"AA"""
""" ûWASûQUOTEDûLASTûWEEKû
AROUNDûBP ûINSIDEûTHEûYEARSûWIDEûOFû

201bp but back of where it priced at swaps

plus 95bp in January.

“I think you’ll probably see preferred

SENIORûFROMûMOSTûOFûTHEû'ERMANûISSUERSûBUTû

WHETHERûTHEYLLûDOûBENCHMARKSûANDûINûTHEû

NEARûTERMû)ûDONTûKNOWvûSAIDûAûSECONDû

banker.

“I think there is probably room to do

some preferred funding in the domestic

market without necessarily doing big

INTERNATIONALûTRADESûTHOUGHû$EUTSCHEû"ANKû

ISûANûOBVIOUSûCANDIDATEûFORûDOINGûEXACTLYû

THATv

!LTERNATIVELYûTHEûBANKûMAYûCHOOSEûTOû

UNDERTAKEûAûLIABILITYûMANAGEMENTûEXERCISEû

TOûREDUCEûITSûSTOCKûOFû4,!#

ELIGIBLEûDEBT

“We think that Deutsche Bank could be

THEûlRSTûMOVERûONûANûEXCHANGEûEXERCISEûTOû

LOWERûITSûFUNDINGûCOSTSûEITHERûBYû

EXCHANGINGûEXISTINGûDEBTûINTOûNEWûPREFERREDû

senior or by calling the outstanding notes

ANDûRE

ISSUINGûATûAûLOWERûSPREADvûANALYSTSûATû

BNP Paribas wrote in a note.

%UROPEANûPREFERREDûSENIORûONûAVERAGEû

trades around 45bp tighter than comparable

non-preferred. That could offer Deutsche a

SIGNIlCANTûCOSTûSAVINGûOFûAROUNDûõMûFORû

EVERYûõBNûEXCHANGEDûORûCALLEDûACCORDINGû

to BNPP’s calculations.

Deutsche’s preferred bonds will be rated

!!

!



AIB GROUP SENIORS SCREAM TIGHTER

ON SECOND IG RATING

AIB GROUP’s senior unsecured bonds screamed

tighter by up to 26bp after a Moody’s

upgrade to Baa3 from Ba2 made the bank

INVESTMENT

GRADEûWITHûTWOûRATINGSûAGENCIES

Moody’s also lifted the senior debt of the

OPCOû!LLIEDû)RISHû"ANKSûPLCûBYûTWOûNOTCHESû

TOû!û4HEûUPGRADESûREmECTûEXPECTATIONSûOFû

REDUCEDûLOSSûGIVENûFAILUREûFORûCREDITORSûGIVENû

!)"SûGROWINGûLOSS

ABSORBINGûCAPACITY

&ITCHûALREADYûRATESû!)"û'ROUPSûSENIORû

DEBTû"""nû)TûISû""ûATû30ûBUTûONûPOSITIVEû

outlook.

4HEûADDITIONALûINVESTMENT

GRADEûRATINGû

opens the bonds up to a wider pool of

INVESTORSûWHICHûSHOULDûLEADûTOûANû

IMPROVEMENTûINû!)"SûFUNDINGûCOSTS

4HATûISûPARTICULARLYûVALUABLEûGIVENûTHEû

GENERALûDRIFTûWIDERûINûSPREADSûOVERûû

ALTHOUGHûTHEûBANKSûNEEDSûAREûRELATIVELYû

LIMITEDû)TSû-2%,ûTARGETûTOûBEûMETûBYû

*ANUARYûûûWASûRECENTLYûSETûATûûOFû

RISK

WEIGHTEDûASSETSûINûLINEûWITHûITSû

PREVIOUSLYûSTATEDûGUIDANCEûOFûõBNnõBN

!)"û'ROUPSûõMûû-ARCHûû

WHICHûWASûBARELYûSUBSCRIBEDûINûAûDIFlCULTû

MARKETûLASTûMONTHûRALLIEDûBPûTOûBPû

OVERûSWAPSûACCORDINGûTOû4RADEWEBûPRICESû)Tû

PRICEDûATûBPû4HEûõMûû*ULYûSû

ALSOûSHOTûTIGHTERûTOUCHINGûBPûOVERûSWAPSû

FROMûBP

h!ûPOSITIVEûRATINGSûMOVEûGOINGûTOû

INVESTMENT

GRADEûMAKESûAûSIGNIlCANTû

DIFFERENCEûnûTHEYûWILLûlNDûNEWûOWNERSûATûTHEû

INVESTMENT

GRADEûLEVELûANDûTHEûEXECUTIONû

CONSIDERATIONSûBECOMEûQUITEûDIFFERENTvûSAIDû

a banker.

Though both outstanding holdco bonds

AREûEURO

DENOMINATEDû!)"ûMAYûSETûUPû

PROGRAMMESûINûOTHERûCURRENCIESûTOûGIVEû

GREATERûmEXIBILITYûINûMEETINGûITSûTARGET

Moody’s also upgraded the bank’s

baseline credit assessment to baa3 from ba1

GIVENûTHEûFASTERûTHANûEXPECTEDûIMPROVEMENTû

INûASSETûQUALITYûACHIEVEDûSINCEû

SWISS FRANCS

MORE CANADIAN SENIOR SWISS

FROM BMO

BANK OF MONTREALûTOOKûADVANTAGEûOFûTHEûWIDERû

European market’s focus on the ECB

meeting on Thursday to bring a long four-

year senior unsecured Swiss

franc-denominated bond issue.

Books opened for a minimum SFr200m

53M    ûCLIPûATûGUIDANCEûOFûAûû

COUPONûANDûYIELDûEQUIVALENTûTOûMID

SWAPSû

PLUSûBPûAREAûORûGOVERNMENTûBONDSûPLUSû

49bp area.

The minimum size was upped to SFr425m

AHEADûOFûLAUNCHûBEFOREû3&RMûWASûPRICEDû

INûLINEûWITHûGUIDANCEûATûMID

SWAPSûPLUSû

BPûGOVERNMENTSûPLUSûBP ûANDûTHEû

EXPECTEDûûCOUPONYIELDûREOFFER

4HEûPAPERûISûDUEûONû$ECEMBERûûû

JUSTûSLOTTINGûINTOûASSETûMANAGERSûû

BASKETSû4HATûWASûHANDYûASûITûOPENEDûUPû

SOMEûLINESûTHATûMAYûHAVEûBEENûlLLEDûINûTHEû

ûlVE

YEARûBASKETûAFTERûOTHERû#ANADIANû

BANKSûPRICEDûAûCOMBINEDû3&RMûINûTHEû

past few weeks.

)TûCAMEûONûTHEûHEELSûOFûSTRAIGHTûlVE

YEARû

bonds from RBC and CIBC – and was priced

INûLINEûWITHûTHEMûTOOûWHENûADJUSTEDûFORûTHEû

slightly shorter maturity. It was also the

LARGESTûOFûTHEûTHREEûBEATINGû#)"#Sû3&RMû

and RBC’s SFr350m.

3WISSûASSETûMANAGERSûTOOKûTHEûMAJORITYûOFû

THEûPAPERûATûûJUSTûSHYûOFûTHEûûTHEYû

TOOKûOFû#)"#SûDEALû!ûTOTALûOFûûACCOUNTSû

TOOKûPARTûFORûANûAVERAGEûTICKETûOFû3&RM

UBSûWASûSOLEûLEADûONûTHEûDEALûASûITûHADû

been on the other two. BOMB was co-

manager.

Canadian lenders are ramping up senior

issuance ahead of the implementation of

4,!#ûRULESûINûTHEûCOUNTRYûDUEûTOûTAKEûEFFECTû

from September 23. Senior debt issued

BEFOREûTHENûWILLûBEûGRANDFATHEREDûBUTûALLû

SUBSEQUENTûISSUANCEûWILLûBEûMOREûEXPENSIVEû

bail-in-able debt.

"-/ûISûRATEDû!A!!!nûTHEûSAMEûASû

CIBC.

BONDS FIG

ALL COVERED BONDS (ALL CURRENCIES)
BOOKRUNNERS: 1/1/2018 TO DATE

Managing No of Total Share
bank or group issues US$(m) (%)

1 LBBW 50 8,747.15 5.9
2 UniCredit 51 8,704.30 5.9
3 Natixis 39 8,317.28 5.6
4 HSBC 44 8,220.71 5.6
5 Commerzbank 45 7,949.27 5.4
6 Deutsche Bank 35 6,872.65 4.7
7 Credit Agricole 33 6,377.84 4.3
8 Credit Suisse 31 6,370.65 4.3
9 SG 30 5,906.69 4.0
10 Barclays 29 5,541.48 3.8
Total 195 147,576.37
Source: Thomson Reuters SDC code: J15a