Banks – AT1 issuance, analyst behaviour and M&A Update
AT1 issuance – Last week, Bloomberg reported that AT1 issuance is close to matching last year’s total despite the market effectively being shut for just over 2 months in 2020. Apparently issuance is only $4bn short of 2019’s total . I don’t think many would have predicted during the depths of March that we would see such a resurgence in new issuance. The feat is a testament to rising credit investor confidence in banks and indicative of the the search for yield in high yielding instruments from large, highly regulated institutions.
Bank Stocks and Analyst Recommendations –
The past few weeks have seen several banks analysts scramble to upgrade the banks sectors with many citing cheap valuations. Are analysts trying to time their recommendations with a rise in Government bond yields (which tends to be a positive catalyst for Bank NIMs)? If government bond yields continue to rise then it could form the basis for systematic type funds to allocate more to the sector..i.e if yields go up, the algo begins buying bank indices/stocks…
Quant types, feel free to comment if you have any input on this last point.
Bank M&A update:
Banks that have combined or are in the process of combining:
Caixa / Bankia
Intesa Sanpaolo / UBI
Press rumours / Analyst views:
Unicaja Banco and Liberbank -BBG
Nordea / BNP (https://www.di.se/nyheter/nordea-het-bricka-i-storspelet-bankbjassar-lurar-i-vassen/)
Soc Gen / BNP combo talk– Morgan Stanley Analysts
Credit Agricole looking for acquisitions in Italy - BBG
UBS / Credit Suisse - BBG
Unicredit / Monte - BBG
Sabaell / BBVA or Kuxtabank - BBG
Source for most of these stories: Bloomberg Quint
With the ECB effectively encouraging consolidation in the banking sector, FIG teams must be burning the midnight oil trying their best to drum up more M&A deals to boost the FY2020 fee pool…!
— I do not guarantee the completeness of the above list —
—Not investment advice—
—I have holdings in the banks sector —