LONDON, Jan 5 (IFR) - The primary market for European bank
debt has got off to its strongest start in years as a barrage of
issuers, taking heed from a challenging 2016, makes the most of
European financials are on track to price more than
34bn-equivalent across euros, sterling and US dollars in the
first three days, steaming past the 23.5bn-equivalent raised in
the first week of 2016, according to IFR data.
The assault across the covered, senior and subordinated
sectors indicates issuers' desire to make the most of conditions
while they last given the challenges presented by looming
political risk, setting 2017 up as another difficult year.
European banks need a strong start after a stop-start 2016,
in what will be a crucial year for building up the new layers of
loss-absorbing debt demanded by global and European regulators.
"There has been competition among issuers - they've all got
a lot of stuff to do, particularly the French, so there's been a
bit of a rush," said one FIG DCM banker.
"And with the market open, and good demand, it's encouraged
people to continue with their plans, or to accelerate them."
The market has opened more strongly than many were
expecting, with the reappearance of southern European
subordinated bank debt testament to that newfound confidence.
Intesa and Santander opened the euro Additional Tier 1 and Tier
2 markets respectively on Wednesday.
"We're moving into more uncertain times so it makes a world
of sense to take funding off the table," said a second banker.
"New issue premiums are skinny and also valuations have also
come in quite significantly."
BBVA for example sold a 1bn 0.625% five-year senior at
swaps plus 55bp on Wednesday, the smallest ever coupon for a
syndicated Spanish senior bond and well inside the 85bp reoffer
of the 1bn Jan 2021 it sold a year ago. That note was bid at
42bp at the open, around 20bp tighter since early December.
TAKING NO CHANCES
Euro covered issuers are proving willing to offer a touch
more spread than usual to maximise size, with seven out of the
week's ten benchmark tranches in a 1bn size or over.
Six issuers priced a combined 8.75bn in the first two days,
prior to another three deals on Thursday - Compagnie de
Financement Foncier's 1.5bn Sep 2023 at swaps plus 5bp,
Coventry's 500m Jan 2024 at 18bp over and Helaba's 1.25bn
five-year at swaps minus 9bp and 750m 10-year at 7bp through.
Activity in the sterling covered market, which is pricing
more tightly than euros and dollars, also showed no sign of
flagging, with Deutsche Pfandbriefbank and Commonwealth Bank of
Australia together taking out another £600m.
In senior, Banque Federative du Credit Mutuel drew more than
3.4bn in orders as it sold a 1.25bn Jan 2022 senior at swaps
plus 37bp, while Allianz opened the euro insurance market with a
1bn 2047 non-call 2027 Tier 2 at swaps plus 235bp.
Others spotted the opportunity to reopen old issues -
Iceland's Arion to top up its 300m Dec 2021 senior to 500m,
and La Banque Postale to sell a 150m tap of its 500m 3% Tier 2
With more banks eager to issue ahead of close periods,
issuance is likely to remain elevated - but perhaps not for
"I can't believe this pace will continue," said the first
banker. "We have a pipeline still, into next week and the end of
the month. But I think things will slow down in the middle of
(Reporting by Alice Gledhill, editing by Alex Chambers and