IFR Magazine - October 27, 2018

properly address the risks to which they
AREûEXPOSED
5NDERûTHEûINITIALûTIMELINEûINSURERSûWOULDû
have had only a month or so to respond to
the new rules and implement the changes in
TIMEûFORûSûYEAR
ENDûACCOUNTINGûPERIODû
PLACINGûTHEMûUNDERûINTENSEûPRESSURE
USTû'ROUPûISûTHEûMOSTûEXPOSEDûOFûANYû5+û
COMPANYûTOûTHEû02!SûCONSULTATIONûANDû
analysts said in July that the company may
need to raise additional regulatory capital to
COPEû4HEYûHAVEûALSOûSPECULATEDûITûMAYûBEû
THEûSUBJECTûOFûAûTAKEOVER
)TSûaMûû&EBRUARYûû4IERûûNOTEû
rallied 25bp to Gilts plus 364bp following
THEû02!SûANNOUNCEMENTûHAVINGûTRADEDûASû
WIDEûASûBPûINû3EPTEMBERûACCORDINGûTOû
2ElNITIVûDATA
'ORDONû!ITKENûANûANALYSTûATû2"#ûSAIDûHEû
HADûPREVIOUSLYûEXPECTEDûAûlNALûDECISIONû
following the consultation around early
$ECEMBERûBUTûBELIEVESûTHATûMAYûNOTû
EMERGEûUNTILû
h!NûEXTENSIONûTOûû$ECEMBERûûISû
EXTREMELYûPOSITIVEûANDûWILLûRESULTûINûAûMOREû
MANAGEDûTRANSITIONûWHICHûWEûEXPECTûWILLû
decrease the potential impact of the
CHANGESvûHEûWROTEûLASTû4HURSDAYû/NûTHEû
OTHERûHANDûAûDELAYûINûTHEûANNOUNCEMENTûOFû
THEû02!SûlNALûDECISIONûhADDSûUNCERTAINTYv
3TILLûTHEûDEVELOPMENTûOFFERSûSOMEû
WELCOMEûRESPITEûFORûUSTû'ROUPûWHICHûWASû
forced to delay a dividend payment in
September due to the lack of clarity on its
CAPITALûPOSITIONûUNDERûTHEû02!SûPROPOSEDû
CHANGESû4HEûEXITûOFûCHIEFûlNANCIALûOFlCERû
3IMONû4HOMASûANNOUNCEDûEARLIERûTHISû
MONTHûHASûCOMPOUNDEDûTHEûPROBLEMS
Just’s bonds have struggled for much of
ûEVENûPRIORûTOûTHEûCONSULTATION
0RIORûTOûLASTûWEEKSûRETRACEMENTûTHEû4IERû
3 note had been on a largely one-way street
SINCEûPRICINGûINû&EBRUARYûATû'ILTSûPLUSûBPû
)TSûaMûûû4IERûûHADûLOSTûAROUNDûû
POINTSûSINCEû&EBRUARYûBUTûWASûTRADINGûAû
POINTûUPûLASTûWEEKûATû

COVERED BONDS

EUROS

STEADY OBG SPREADS BELIE ITALIAN
ACCESS PROSPECTS

Relative serenity in Italian covered bond
spreads in the face of ratings downgrades
belies the implausibility of market access
FORûISSUERSûASûTHEûGULFûBETWEENû/"'SûANDû
"40SûADDSûTOûHEADLINEûCONCERNS
-OODYSûDOWNGRADEDûNINEû/BBLIGAZIONIû
"ANCARIEû'ARANTITEû/"' ûPROGRAMMESûTOû

!AûFROMû!AûLASTû7EDNESDAYûFOLLOWINGûTHEû

downgrade of Italy to Baa3 the previous

WEEK

There was little sign of a reaction and

analysts believe the spread impact should be

manageable as the bonds remain in Double

!ûTERRITORYû4HEûDOWNGRADESûHOWEVERûAREû

just another factor that make new issuance

ANûUNAPPEALINGûPROSPECT

h.OWûTHEûMARKETûISûNOTûOPENûFORûTHEMvû

SAIDûAûSYNDICATEûBANKER

Italian banks last came to the covered bond

MARKETûINû*ULYûBUTûHAVEûBEENûABSENTûSINCE

!ûõBNûSEVEN

YEARûFORûINTESA SANPAOLO

ENCOURAGEDûAFTERûITûGARNEREDûõBNûOFû

ORDERSûBUTûSUBSEQUENTûõMûTRADESûFROMû

MEDIOBANCAûBPER BANCA and BANCO BPM found

the going tougher and were priced

SUCCESSIVELYûWIDER

4HEûI"OXXû%52û)TALYû#OVEREDû)NDEXûHASû

WIDENEDûBPûYEAR

TO

DATEûACCORDINGûTOû

2ElNITIVû%IKONû-UCHûOFûTHISûWIDENINGûTOOKû

PLACEûINû-AYûWHENûUNCERTAINTYûSURROUNDINGû

the formation of Italy’s coalition

GOVERNMENTûHITû)TALIANûDEBT

Since the last benchmark OBGs in mid-

*ULYûMOVEMENTûINûTHEûINDEXûHASûBEENûMOREû

LIMITEDûWITHûFURTHERûWIDENINGûOFûAROUNDû

5bp coming after the coalition government

PUBLISHEDûITSûûBUDGETûPROPOSALûINûLATEû

3EPTEMBER

0OLITICALûUNCERTAINTYûHASûBEENûAûCONSTANTû

with that budget leading to a stand-off with

THEû%UROPEANû#OMMISSIONû-ARKETû

participants doubt investors’ willingness to

TAKEûONûMOREû)TALIANûEXPOSUREûEVENûINûLOW

BETAûCOVEREDûBONDûFORM

GROWING GULF

$ESPITEûTHEûHEADLINESûSECONDARYûLEVELSûONû

RECENTû/"'SûHAVEûBEENûKEPTûINûCHECKûBYû%#"û

PURCHASESûANDûTHEûLACKûOFûNEWûSUPPLY

Intesa’s €1bn July deal was trading 1bp

INSIDEûREOFFERûONû4HURSDAYûATûSWAPSûPLUSû

BPûWHILEûTHEûOTHERûTHREEûRECENTûTRADESû

were quoted just a few basis points wider

THANûREOFFER

(OWEVERûSYNDICATEûBANKERSûBELIEVEûTHESEû

levels must be handled with caution as

ISSUERSûWOULDûNEEDûTOûPAYûSIGNIlCANTû

PREMIUMSû

ûOFûBPûORûEVENûBPûSOMEûSAYû

û

ANDûBECAUSEûTHEYûAREûSOûFARûINSIDEû"40û

SPREADS

4HEûû*ULYûû"40ûWASûLASTûQUOTEDû

ATûBPûAROUNDûBPûWIDERûTHANû

-EDIOBANCASûû!UGUSTûSûFORû

EXAMPLE

“If you look at the outstandings and then

ADDûBPûBPûBPûPREMIUMû

ûWHATEVERû

û

YOUûWOULDûSTILLûBEûLOOKINGûTOûPRICEûSUPERû

SUPERûTHROUGHûTHEû"40ûCURVEvûSAIDûAû

SYNDICATEûBANKER

h7OULDûYOUûRATHERûHAVEû"40SûORûCOVEREDû

bonds? If a covered bond is more than 140bp

ORûBPûTHROUGHûITûDOESNTûMAKEûANYûSENSEv

Intesa’s deal in July was priced around

BPûINSIDEû"40SûONEûOFûTHEûBIGGESTûEVERû

DIFFERENTIALSûBETWEENû/"'SûANDû"40SûINûTHEû

PRIMARYûMARKETû"UTûTHEûGULFûCOULDûGROWû

FURTHERûIFûTHEûBUDGETûSTAND

OFFûCONTINUES

!ûSYNDICATEûBANKERûSAIDûTOPû)TALIANûNAMESû

Intesa and UNICREDIT - and potentially UBI -

COULDûACCESSûTHEûMARKETûIFûTHEYûPAIDûUP

“But the new-issue premium would have

TOûBEûHUGEvûHEûSAID

!NOTHERûQUESTIONEDûWHETHERûANYûISSUERûATû

ALLûWOULDûBEûABLEûTOûGETûAûDEALûDONE

h-AYBEûITDûBEûAûDIFFERENTûSTORYûIFûYOUû

CAMEûWITHûAûSMALLûTAPûORûAûPRIVATEû

PLACEMENTûWITHûVERYûSPECIlCûINVESTORSûINû

MINDûBUTûSOMETHINGûINûPUBLICûBENCHMARKû

FORMvûSAIDûTHEûSYNDICATEûBANKERûh)TSûREALLYû

DIFlCULTûTOûIMAGINEûTHATûCANûBEûDONEv

)NDEEDû"ANCAû#ARIGEûISSUEDûAûRETAINEDû

õMûmOATING

RATEûTHREE

YEARûCOVEREDûBONDû

LASTû4HURSDAY

The bond will be used by the issuer for

%#"ûRElNANCINGûOPERATIONSû)TûWASûSOLE

LEDû

BYû5"3

ARKEA REAPS FIVES DEMAND, SCBC

TAKES ‘TINDER’ APPROACH

ARKEA HOME LOANS SFHûDREWûõBNûOFûORDERSû

FORûAûõMûLONGûlVE

YEARûCOVEREDûBONDûLASTû

4UESDAYûITSûMATURITYûPROVINGûKEYûWHILEû

SWEDISH COVERED BOND CORPORATION pushed out

longer with an opportunistic seven and 15-

YEARûDUO

Covered bond supply has been steady amid

RECENTûWIDERûVOLATILITYûBUTûSOMEû

underwhelming deals - such as a lacklustre

€250m February 2024 tap for LANDESBANK

HESSEN-THUERINGEN GIROZENTRALEû(ELABA  ûLASTû

-ONDAYû

ûHAVEûSHOWNûEXECUTIONûREMAINSû

TRICKY

One of the more decisive factors in deals’

SUCCESSûHASûBEENûMATURITYûWITHûlVE

YEARSû

THEûSWEETûSPOTûASûTYPIlEDûBYûAûõBNûNOTEû

FORû"ANKûOFû.OVAû3COTIAûONû/CTOBERû

4ARGETINGûTHATûSHORT

ENDûDEMANDû!RKEASû

-ARCHûûISSUEûWASûMARKETEDûWITHû

GUIDANCEûOFûBPûOVERûMID

SWAPSûAREA

ALL COVERED BONDS (ALL CURRENCIES)

BOOKRUNNERS: 1/1/2018 TO DATE

Managing No of Total Share

bank or group issues US$(m) (%)

1 HSBC 59 11,543.41 6.1

2 LBBW 64 10,708.42 5.7

3 Natixis 53 10,366.53 5.5

4 UniCredit 62 10,210.00 5.4

5 Commerzbank 59 9,666.01 5.1

6 Deutsche Bank 43 8,234.59 4.3

7 UBS 39 8,043.27 4.2

8 Credit Agricole 43 7,904.98 4.2

9 SG 41 7,577.89 4.0

10 Credit Suisse 36 7,082.69 3.7

Total 266 189,494.36

Source: Refinitiv SDC code: J15a