LONDON, April 24 (IFR) - Pricing will be crucial for a wave
of new bank capital deals as investors force issuers to pay up
on trickier names, particularly against a choppier market
Tier 2 trades from Ibercaja Banco and Banco Popolare Societa
Cooperativa were pencilled in for potential execution this week,
but neither emerged as broader volatility around Greece kept a
lid on higher beta trades. Permanent TSB's Additional Tier 1
bond, also anticipated this week, is now touted for Monday.
Some thought the issuers had been caught out on timing, with
a cooling market leading to some investor inertia. Added to
that, national champion Intesa was forced to downsize a 10-year
Tier 2 deal from EUR750m to EUR500m last week amid tough
"Investors will consider the uncertainties and review the
areas that may be most affected - and obviously you end up with
the periphery and the sub space in financials," said Jens
Vanbrabant, head of investment grade credit at ECM Asset
But the market generally still believes that these deals can
get done - even if at a cost.
"There is pretty much a price for everything. It's not a
question of not getting the deal done, it's how much you pay,"
said Laurent Frings, co-head of EMEA credit research at Aberdeen
A syndicate banker agreed: "Three years ago, these names
didn't have access. They do now, but they'll have to pay -
possibly at an egregious price."
One banker suggested the FIG market could learn a lesson
from high-yield, where issuers are finding appetite for riskier
"Those high-yield trades are getting done but not 10bp back
of fair value which is probably where some of those FIG trades
were pitched. It is all about price, especially as the current
uncertainty is impacting FIG more than anything else."
POSITIVE ATTITUDE REQUIRED
Market participants reiterated that there is a buyer base
for these banks, particularly among the high yield and hedge
fund communities, but that investors needed to have the right
"This is not an easy trade," said a DCM banker commenting on
the proposed AT1 bond from Permanent TSB, which will be the
first trade of its type from an Irish bank.
While Ireland's banking system has staged an impressive
turnaround since suffering badly in the crisis, investor
feedback on Friday pointed to a lofty 9% yield level.
"If they are in a constructive frame of mind and looking for
higher beta stuff, then it will work. However, the current
backdrop means that investors are very much in a glass-empty
frame of mind," the DCM banker continued.
A lead on the mandate from Italian lender Banco Popolare
Societa Cooperativa was confident that sufficient depth of
demand would come from investors who see value in the name
versus the national champions.
"This is very much a play on the bank. Popolare is a top
player in its market and that jurisdiction. It will come at a
decent spread and those who buy it are very much playing the
But investors may demand punishing premiums away from the
periphery too. Germany's NordLB is hoping to print an inaugural
USD Reg S AT1 following a roadshow in the coming week, but an
investor sounded a note of caution.
The bonds can be temporarily written down if NordLB's Common
Equity Tier 1 ratio falls below 5.125%. The financial
institution had a 10.7% CET1 at the end of 2014.
"It will be very interesting. The German banking system has
struggled for a long time, but the regulator and the sovereign
are willing to support the system so the market gives it this
credential and signs off on everything. Do you really want to be
buying the most equity-like structure where you have question
marks going forward?"
NordLB successfully passed 2014's ECB stress test and had a
8.77% CET1 ration in the adverse scenario.
(Reporting by Alice Gledhill, editing by Julian Baker, Helene