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Fitch: AT1 Issuance Remains Low, Despite Third Quarter Pick-Up
December 21, 2016 / 3:39 PM / a year ago

Fitch: AT1 Issuance Remains Low, Despite Third Quarter Pick-Up

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: AT1 Tracker Dashboard December 2016 here LONDON, December 21 (Fitch) Issuance of additional Tier 1 (AT1) instruments picked up after a slow 1H16, says Fitch Ratings, with USD29bn raised by banks in 3Q16 and a further USD11.9bn in 4Q16 to date. Despite this, overall 2016 issuance, around USD65bn based on preliminary data, remains low compared with previous years. In Europe, regulatory developments, notably lower Pillar 2 capital requirements feeding into the maximum distributable amount threshold calculation for eurozone banks, remain supportive of the asset class and should continue to drive supply in 2017. Volumes in 2H16 to date were biased towards APAC issuers, in particular Chinese (aggregate of USD11.3bn) and Japanese (USD5.4bn) banks. Issuance by Indian banks has also been increasing. In Europe, large UK banks (USD6.4bn), French (USD2.3bn), Swiss, Dutch and Nordic banks remained active. Notable AT1 bonds in 2H16 included Unicredit SpA's EUR500m, raised on the back of its revised strategy announcement in December, and the first Basel III compliant AT1 issued by a Russian bank, JSC Alfa Bank, rated 'B' by Fitch. Lower coupon omission risk in the market is evidenced by the average distance to coupon omission in Fitch's AT1 & CoCo tracker, which increased to 283bp (by 17bp), based on 1H16 CET1 ratios (fully loaded, where available) and the latest known combined CET1 requirements. The latest disclosure indicates that individual combined CET1 buffer requirements of eurozone banks decreased by between 25bp (Unicredit SpA) and 125bp (BNP Paribas). At the same time, the market perception of the riskiness of these instruments, as expressed by various measures such as the average Z-Spread or yield-to-call, decreased to this year's low point in December. Fitch's latest AT1 & Coco Tracker includes 239 capital instruments with numerical write-down or conversion totalling USD268bn issued up to end-3Q16 as well as financial data on the issuing banks, which allows users to assess the absolute and relative coupon and write-down/conversion risk. An accompanying dashboard includes country- or bank-specific commentary. The report is available at or by clicking the link above. Contact: James Longsdon Managing Director Fitch Ratings Limited 30 North Colonnade London E14 5GN +44 20 3530 1076 Ioana Sima Analyst +44 20 3530 1736 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 WEB SITE AT WWW.FITCHRATINGS.COM. 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