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The bank is strengthened with more than 12,500 million issues in three weeks

Date: December 10, 2023 Time: 07:13:23

Frantic activity in the capital market. In just 20 days, Banco Santander, BBVA, Caixabank and Banco Sabadell have issued issues in different currencies and typologies that have generated high interest from the market. In total, they have issued almost 12.5 billion euros (in constant euros). And it is that the entities have detected a great appetite on the part of investors and have not wanted to miss the opportunity to gradually increase their liquidity and capital buffers.

Especially at a time when, although sovereign debt yields have moderated somewhat (the Spanish 10-year bond trades with a yield of 3%), there is a lot of uncertainty about how the cost will evolve in the future, just when the ECB is putting an end to its debt purchase programs.

Víctor Alvargonzález, director of strategy and founding partner of Nextep Finance, explains that this strong volume of issuances is based on the fact that banks “consider that the current conditions are ideal, since everything indicates that the profitability of the debt in the medium and The long-term will continue to rise in Europe, after the European Central Bank (ECB) has confirmed more interest rate hikes”. of liquidity and capital as soon as possible.

On the part of investors there is no doubt that there is special interest, especially after the behavior of fixed income last year. Many of these issues at the start of 2022 have coupons close to 0%, while the current ones can offer up to just over 9%. And it is that fixed income suffered the perfect storm due to the rise in interest rates, which was one of the prices during the year 2022. This decreased appetite has allowed banks to place their issues without problems, but even managing to lower the coupons of departure.

Market sources point out that the start of the year, in fact, has been especially strong, although January is usually a month with high activity. Among the Ibex banks, the one that has stood out especially has been Banco Santander, which has issued 9,000 million so far in January, in three different currencies: 500 million in pounds in two-year preferred senior debt; another 3,500 million dollars in three-year senior bonds and 5,000 million euros more at 5 years. The latter had an excess demand of 7,500 million euros.

If we take a look at what happened last year, according to market data, Banco Santander made a single issue in January, for an amount that was also lower: 1,500 million euros, with a coupon of 0.10%. From the first bank on the Spanish stock market, they explain that issues in different currencies have a diversifying objective both in terms of currencies, as well as the market and type of investor.

Caixabank is another of the entities that has issued both in dollars and in pounds this year. The most recent, a bond placement for 500 million pounds with a demand that has risen to 1,500 million. This operation has also made it possible to strengthen its capital by 26 basis points to 17.36% pro-forma at the end of the quarter. Likewise, it also appealed to the market with 1,250 million non-preferred bonds in dollars, with a maturity period of six years, registering a demand for the operation of more than 3,400 million, according to the entity itself.

This paper has an option to be redeemed early in the fifth year, in a non-preferred senior bond format. In addition, the strong demand lowered the price by 25 basis points, to stand at 250 basis points above the US five-year bond. These 1,750 million improved the behavior of last year, when in January it made a single issue worth 1,000 million, with a coupon of slightly less than 1.65%.

BBVA and Banco Sabadell, loans with high demand

BBVA and Banco Although in both cases they have experienced strong interest. Thus, BBVA has opted for an operation of mortgage bonds for an import of 1,500 million euros with a term of 4.5 years. The exit interest rate (‘mid swap’ plus 32 basis points) could be reduced to ‘mid swap’ plus 27 basis points, thanks to the fact that there were requests for 3,000 million euros. In addition, it so happened that it is the first issue of this type of debt since November 2016. In January 2021, it issued 1,000 million with a coupon of 0.88%.

Finally, Banco Sabadell went to the market with an issue of ‘coconuts’ (contingent convertible bonds), with 500 million euros, after having had to increase the amount by 100 million, due to the high interest they received (the requests reached up to 3,000 million euros). As a result, the initial coupon was lowered to 9.37%.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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