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Fitch: Europe Financials' Bond Issuance Up as Downgrades Contained
September 4, 2014 / 11:53 AM / 3 years ago

Fitch: Europe Financials' Bond Issuance Up as Downgrades Contained

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: EMEA Financials Bond Market Monitor here LONDON, September 04 (Fitch) Fitch Ratings says European financial-sector issuers increased their supply of new bonds by 13% year on year in August, benefitting from rising investor sentiment and fresh lows in new issue coupons. New volume was boosted by a near 3x rise in bank junior bonds as bank bail-in plans and refinancing of legacy instruments to boost Basel III capital provided an incentive for banks to issue despite ongoing deleveraging. Swelling bank junior bond issuance was a major factor boosting European high-yield issuance in 7M14, helping it surpass issuance in the US high-yield market for the first time. The resumption in additional tier 1 supply following a market volatility-induced pause in July and August will support issuance further as banks move to comply with regulatory capital targets while pricing is advantageous. A declining volume of bonds affected by downgrades was largely behind the strengthening rating migration trend for financial-sector bonds in 7M14, compared with the whole of 2013. The lower downgrade rate led to a 72% improvement in the ratio of upgrades to downgrades by volume to 0.37x. However, the improvement belies the fact that many EU banks face downward rating pressure due to weakening sovereign support and evolving bank resolution plans, presenting the main threat to an extension of the trend. The gradual rehabilitation of Europe's troubled periphery is reflected in the lower share of downgrades from eurozone financials in 7M14 compared with a year earlier. The region now accounts for three-quarters of bond downgrade volume from financial-sector issuers, down from 92% in 2013. The share of downgrades from GIIPS-based financial issuers halved over the same period to 12% of total volume. Italian and Spanish bank bonds accounted for only 1.5% of total downgrade volume in 7M14, down from 24% in 2013, while Portugal took 11%, driven solely by downgrades of Banco Espirito Santo bonds, up from 0.3% in 2013. Overall, 4% of financial-sector bonds outstanding were affected by downgrades in the year through July, down from almost 6% in 2013. More information is available in the report, 'EMEA Financials Bond Market Monitor', which is available at or by clicking the link above. Contact: Michael Larsson Director +44 20 3530 1260 Fitch Ratings Limited 30 North Colonnade London E14 5GN Monica Insoll Managing Director +44 20 3530 1060 James Longsdon Managing Director Financial Institutions +44 20 3530 1076 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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