HALISTER1: Europe Banks AT1 2016 Target Unchanged as Issuance Returns: SG

Europe Banks AT1 2016 Target Unchanged as Issuance Returns: SG

(Bloomberg) -- Issuance forecast for the year remains at EU42b even though supply so far this year, of EU4b, has been 1/3 of the same point in 2015, Paul Fenner-Leitao, analyst at SocGen, writes in client note.
  • European banks will look to issue AT1 “on any signs of stability and market appetite”
    • Market volatility earlier this year hasn’t changed banks’ goals for capital issuance
    • Signs that Tier 2 issuance has already begun to recover
    • NOTE: Last week UBS sold first AT1 deal in Europe since Jan. 12, Commerzbank, Santander sold Tier 2
  • Barclays, BNP, DNB, Erste, HSBC, Rabobank, RBS, Standard Chartered may issue this year; Santander, Commerzbank also possible
    • Lloyds, Nordea, Svenska Handelsbanken unlikely to issue AT1
  • SG remains overweight AT1 and believes that, “on balance, investors get over-paid for the risks”; “AT1 is the sweet spot now”
  • Amid an EC review of coupon risks in AT1 securities, any move to introduce flexibility to bank coupon payments will signal banks’ perception AT1s are fixed income not equity, and the ECB understands that skipping a coupon can endanger financial stability
  • NOTE: Yields on BofAML COCO Index have tightened to 6.2% from a record high of 7.2% in Feb.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
SHBA SS (Svenska Handelsbanken AB)
EBS AV (Erste Group Bank AG)
BNP FP (BNP Paribas SA)
BARC LN (Barclays PLC)
DNB NO (DNB ASA)

People
Paul Fenner-Leitao (Societe Generale SA)

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