IFR International - 03.11.2018

(Axel Boer) #1

Top news


SMBC helps sun rise on Japan covereds


„ Bonds Debut deal attracts €1.4bn despite unusual structure


BY TOM REVELL, DANIEL STANTON


SUMITOMO MITSUI BANKING CORPORATION
OPENEDûTHEûAPANESEûCOVEREDû
BONDûMARKETûINûASSUREDûSTYLEûLASTû
4UESDAY ûWITHûAûõBNûlVE
YEARû
CONTRACTUALûDEALûTHATûATTRACTEDû
MOREûTHANûõBNûOFûDEMAND
4HEûISSUEûISûTHEûlRSTû
APANESEû
COVEREDûBONDûANDûARRIVESûSOMEû
ûYEARSûAFTERûINITIALûISSUANCEû
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lNANCIALûCRISISû(URDLESûINû
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ANDûREQUIREDû3-"#ûTOûUSEûANû
UNUSUALûSTRUCTUREûTOûRECREATEû
COVEREDûBONDûFEATURES ûBUTûTHEû
DEALûNEVERTHELESSûCONVINCED
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ISSUERSûTOûFOLLOW vûSAIDûAû$#-û
BANKERûATûONEûOFû3-"#SûLEADSû
h7ITHûAû53TRNûMORTGAGEû
MARKETûINû
APAN ûONEûWOULDûBEû
SURPRISEDûIFûWEûDOûNOTûSEEûOTHERû


ISSUERSûFOLLOWINGûINû3-"#Sû
FOOTSTEPSv
"ANKERSûSEEûPOTENTIALûFORûAû
SIZEABLEûCOVEREDûBONDûMARKETûINû
*APAN ûWITHûCONSERVATIVEû
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ISSUANCEûPERûYEARûDOWNûTHEûLINE
!TSUSHIû/UCHIYAMA ûSENIORû
VICE
PRESIDENT ûDEBTûSTRATEGYûANDû
ISSUANCEûGROUP ûTREASURYûUNITûATû
3-"# ûSAIDûTHEûSIZEûOFû3-"#Sû
õBNûCOVEREDûBONDûPROGRAMMEû
SHOWSûITSûCOMMITMENT
h7EûWOULDûLIKEûTOûBECOMEûAû
REGULARûISSUERûANDûCREATEûAûCLEARû
CURVE vûHEûSAID
4HEûlVE
YEARûDEALûWASû
MARKETEDûWITHûINITIALûGUIDANCEû
OFûMID
SWAPSûPLUSûLOWMIDûSû
BYûLEADSûBarclays, BNP Paribas,
Credit Agricole, Goldman Sachs,
SMBC NikkoûANDûUBSû!TûTHEûlRSTû
UPDATE ûBOOKSûWEREûREPORTEDû
NORTHûOFûõBN

4HEûSPREADûWASûTHENûlXEDûATû
BPûANDûTHEûSIZEûATûõBNûnûLARGEû
FORûANûINAUGURALûTRADEûnûWITHû
BOOKSûEXCEEDINGûõBNûFROMûû
ACCOUNTS
h)TûWENTûEXCEPTIONALLYûWELL û
ACHIEVINGûEVERYTHINGûWEûSETûOUTû
TOûACHIEVE vûSAIDûTHEû$#-û
BANKER
"ANKERSûAWAYûFROMûTHEûDEALû
SAIDûTHEûDEPTHûOFûDEMANDûANDûTHEû
SPEEDûOFûTHEûEXECUTIONûSHOWEDû
THEûCONTRACTUALûSTRUCTUREûWASû
ACCEPTEDûBYûINVESTORS
!LLOCATIONSûTOû#ONTINENTALû
%UROPEûACCOUNTEDûFORûMOREûTHANû
ûOFûTHEûDEALû!SSETûMANAGERSû
TOOKû ûCENTRALûBANKSOFlCIALû
INSTITUTIONSûûANDûBANKS
PRIVATEûBANKSû ûACCORDINGûTOû
AûMARKETûSOURCE
4HEû$#-ûBANKERûSAIDû
TRADITIONALûCOVEREDûBONDû
INVESTORSûWEREûWELLûREPRESENTEDû

INûTHEûBOOKûDESPITEûUNCERTAINTIESû
ABOUTûTHEûDEALSûREGULATORYû
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ANDûTHEûPREFERENCEûOFûMANYûFORû
REGULATEDûCOVEREDûBONDS
h3OMEûBANKûTREASURIESû
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/UCHIYAMAûh4HEûSTATUSûOFûTHEû
LIQUIDITYûCOVERAGEûRATIOûISûTHEû
BIGGESTûFACTORûFORûSOMEûBANKû
TREASURIES ûBUTûFORûOTHERSûITû
DIDNTûSEEMûAûBIGûFACTORv

HALFWAY HOUSE
4HEûDEALûWASûPRICEDûATûROUGHLYû
HALFûTHEûSPREADûOFû3-"#SûEUROû
SENIORûOUTSTANDINGS ûWITHûITSû
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ALTHOUGHûAûNEWûISSUEûWOULDûBEû
EXPECTEDûTOûPRICEûWIDER
h4HEûCLIENTûDIDûTHEûRIGHTûTHINGû
ANDûLEFTûENOUGHûONûTHEûTABLEûFORû
SECONDARYûMARKETûPERFORMANCEû
ANDûATûTHEûSAMEûTIMEûGOTûAûGREATû

Politics threatens Italian bad loan clean-up


„ People & Markets Political risks and government bond sell-off make life more difficult for doBank


BY GARETH GORE


)TALYSûLARGESTûSERVICERûOFûBADûLOANSû
HASûWARNEDûTHATûTHEûGOVERNMENTSû
ONGOINGûDISPUTEûWITHûTHEû
%UROPEANû5NIONûOVERû2OMESû
PLANSûFORûPUBLICûSPENDINGûCOULDû
DERAILûEFFORTSûTOûCLEANûUPûMOREû
THANûõBNûOFûBADûLOANSûCURRENTLYû
FESTERINGûONûTHEûBALANCEûSHEETSûOFû
THEûCOUNTRYSûBIGGESTûBANKS
4HEûSTAND
OFFûBETWEENû2OMEû
ANDû"RUSSELSûHASûPROMPTEDûAûSELL
OFFûINû)TALIANûGOVERNMENTûDEBTû
OVERûRECENTûWEEKSûTHATûHASûLEFTû
THEûCOUNTRYSûBANKSûNURSINGû
HEFTYûLOSSESûONûTHEûõBNûOFû
PUBLICûDEBTûTHATûTHEYûOWN û
WHICHûHASûEATENûINTOûTHEûCAPITALû
BUFFERSûTHEYûAREûREQUIREDûTOûHOLD
!TûTHEûSAMEûTIME ûRAISINGûFRESHû
FUNDSûHASûBECOMEûTRICKY ûWITHû
)TALIANûBANKSûINûEFFECTûSHUTûOUTûOFû
BONDûANDûEQUITYûMARKETSûFORûMOREû
THANûTWOûMONTHSûNOWû7ITHûJUSTûAû
FEWûWEEKSûTOûGOûUNTILûTHEûENDûOFûTHEû
YEAR û)TALYSûLARGESTûBANKû5NI#REDITû
HASûONLYûRAISEDûABOUTûAûTHIRDûOFû
WHATûITûPLANNEDûTOûTHISûYEAR


4HEûADVERSEûCONDITIONSûAREû
MAKINGûITûHARDERûTOûCONTINUEûTHEû
WORKûOFûCLEANINGûUPûBANKSû
BALANCEûSHEETS ûWITHûBANKSû
RELUCTANTûTOûPROGRESSûWITHûSALESûORû
WRITEDOWNSûTHATûALMOSTûINVARIABLYû
ALSOûINVOLVEûCAPITALûHITSû5NI#REDITû
ANDû)NTESAû3ANPAOLOûEACHûSTILLû
HAVEûMOREûTHANûõBNûOFûNON
PERFORMINGûLOANSûONûTHEIRûBOOKS
h3PREADSûHAVEûBEENû
INCREASING ûWHICHûOBVIOUSLYûPUTSû
PRESSUREûONûBANKûCAPITALûANDû
MAKESûITûMOREûDIFlCULTûFORûTHEMû
TOûTACKLEûTHEIRûBADûLOANS vûSAIDû
-ANUELAû&RANCHI ûCHIEFûlNANCIALû
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BADûLOANûSERVICERûINû)TALYûWITHû
õBNûOFûNON
PERFORMINGûLOANSû
UNDERûMANAGEMENT
h4HEûPROBLEMûISûTHAT ûIFûTHEYû
STOPûSELLING ûTHEûRISKSûTOûTHEIRû
BALANCEûSHEETSûWILLûCONTINUEûTOû
BEûHIGH vûSHEûSAID ûADDINGûTHATû
THEûDAMAGINGûEFFECTSûOFûTHEû
POLITICALûSTAND
OFFûCOULDûEXTENDû
BEYONDûDELAYEDûPORTFOLIOûSALESû
h)FûECONOMICûGROWTHûTURNSûOUTûTOû
BEûWEAKERûTHANûEXPECTED ûTHENû

YOUûHAVEûANûADDITIONALûIMPACTû
FROMûLOWERûRECOVERIESvû

HALT TO PROGRESS
4HEûRECENTûPARALYSISûCOMESûAFTERû
TWOûYEARSûOFûFRANTICûACTIVITYû
CLEANINGûUPûTHEûSYSTEMû4HREEû
BANKSûWEREûBAILEDûOUTûBYûTHEû
GOVERNMENTûAFTERûTHEYûWEREû
UNABLEûTOûRAISEûCAPITALûPRIVATELY û
WHILEûSEVERALûBADûLOANûSALESûTOOKû
PLACE ûINCLUDINGûANûõBNû
PORTFOLIOûUNLOADEDûBYû5NI#REDITû
nûTHEûLARGESTûTOûDATE
/THERûSALESûAREûINûTHEûWORKS û
INCLUDINGûAûBADûLOANûSALEûFROMû
"ANCOû"0-û4HEû6ERONA
BASEDû
LENDERûHASûSAIDûTHEûDEALûISûONû
COURSEûTOûPROCEEDûNEXTûMONTH ûBUTû
BANKERSûHAVEûBECOMEûCONCERNEDû
ABOUTûWHATûCONCESSIONSûINVESTORSû
MIGHTûDEMANDûGIVENûTHEûCURRENTû
BACKDROPûANDûTHEûIMPACTûONûTHEû
CAPITALûLEVELSûOFû"0-
3TILL ûDO"ANKûSEESûHUGEû
POTENTIALûFORûGROWTHû4HEû
COMPANYûMANAGESûBADûLOANû
PORTFOLIOSûDAY
TO
DAYûONûBEHALFûOFû
BANKSûANDûINVESTORSûnûITûCOUNTSû

&ORTRESSûANDû0IMCOûWHICHûBOUGHTû
THEûõBNû5NI#REDITûDEAL ûAMONGû
ITSûCLIENTSûnûANDûSEEKSûTOûRECOUPû
MONEYûTHROUGHûAGREEMENTSûWITHû
BORROWERSûORûCOURTûACTION
"UTûITûISûLOOKINGûOUTSIDEûOFûTHEû
)TALIANû.0,ûMARKETûFORûTHATû
GROWTHû)TûRECENTLYûSETûUPûANû
OFlCEûINû'REECE ûANDûSEESû
POTENTIALûINûWINNINGûMANDATESû
RELATEDûTOûTHEûõBNûOFûBADû
LOANSûTHATûBANKSûHAVEûTHEREû)TûISû
OVERHAULINGûITSûSTRUCTUREûTOûALLOWû
ITûTOûTAKEûONûMOREûLEVERAGEûANDû
POTENTIALLYûBUYûSOMEûOFûITSûRIVALSû

Source: doBank

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2008200920102011201220132014201520162017
NPLs UTPs

BAD LOANS AT ITALIAN BANKS
GROSS EXPOSURE, €bn
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