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Corona crisis shows AT1s are not fit for purpose
If regulators won’t turn off banks' additional tier one capital coupons during the coronavirus crisis, they will never find reason to.
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Oil price war confirms what investors feared about Saudi Aramco
Saudi Aramco’s IPO last year was a historic event for the company and its owner, Saudi Arabia, but despite a record $29.4bn being raised at IPO, international investors stayed away. They had demanded that the shares offered a discount to other listed oil majors, in part because of the political risk associated with the company. The fact it is now a tool in Saudi Arabia’s oil price war with Russia will have vindicated many in their decision to sit out the deal.
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Strong banks also need central bank support
Canadian banks are among the largest, most profitable and best rated in the world, but that does not grant them immunity from liquidity bottlenecks. A recent spree of deals — although in some ways a show of might — illustrated that even the most fortified of lenders can appear vulnerable.
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Never miss an opportunity for good PR
Standard Chartered’s announcement that it was allocating $1bn to help companies deal with coronavirus, or transition towards making essential medical kit, makes a virtue of doing what most banks are up to anyway. There’s nothing wrong with a bit of good news in these troubled times, but Stan Chart’s competition might feel they’ve missed a trick.
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EM’s acid test
For years, the best sovereign issuers in the emerging markets would boast that their latest bond deal showed how much the mystical “international financial community” supported the current administration’s macroeconomic management. And EM investors would pretend that buying the stuff was to have the map to Treasure Island.
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Corona bonds: an idea that cannot be contained
‘Corona bonds’ have been talked up so much that the EU risks underwhelming the market by failing to act. It has become a question of political solidarity within the region, not simply one of debt management.
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A note from GlobalCapital's managing editor
Dear reader, These are extraordinary times for global capital markets as the world reels from the spread of Covid-19.
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Your country needs you, investment bankers
The 2008 financial crisis forged a generation of investment bankers well versed in advising governments — and with many having returned to banking, they are likely to be in demand again. But history suggests banks will not be earning lucrative fees, writes David Rothnie.
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Dry Hong Kong sets fear in the hearts of men
Life as we know it in Hong Kong is over.
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You can't separate the dollar from the US government
US president Donald Trump looks unable to lead a global response to the health and economic crisis caused by the coronavirus pandemic, but the dollar is unchallenged as the global safe haven in times of crisis. This contradiction is destabilising.
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Closing stock markets is not the answer
Short selling bans in several European countries have led to fears that regulators may move to shut down stock markets altogether if the turbulence caused by the spread of Covid-19 worsens further, but this would be a serious mistake.
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Republican bailout package is finance's Patriot Act
There is a plan to rescue the US economy with a $500bn corporate bailout. At the time of writing, that plan is held up in the US Senate. While the country's president Donald Trump is griping about the delay, it’s a fight worth having. The Republican Party's proposal is woefully short on oversight.
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Leveraged companies need help too
Extraordinary support measures from central banks across the world include an element of corporate lending, but all the schemes announced so far target SMEs, and companies rated BBB- and above. That leaves a gaping hole in the rescue net, which the authorities must fill.
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Chinese issuers need less comfort, more support
China’s top regulators went above and beyond expectations over the weekend in providing reassurance that the country’s markets are on solid footing. While this was helpful, more action to support companies falling through the cracks is sorely needed.
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Covid-19: a transparency test for borrowers
These are testing times for corporations around the world as they find ways to navigate the impact of the Covid-19 pandemic on their businesses and debt profiles. Now more than ever, transparency from borrowers is absolutely key.
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Borrow like there’s no tomorrow
“There are decades when nothing happens; and there are weeks when decades happen.” So said Vladimir Lenin, although the founder of Soviet Russia probably didn’t write this with the capital markets in mind.
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Debt advisers called up for liquidity battle
Firms across Europe are clamouring for crisis funding but while debt advisory bankers have joined the frontline in finding solutions some admit they may struggle to cope with the sheer scale of the challenge, writes David Rothnie.
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Yes Bank AT1 write-off: a wake up call
The decision by the Reserve Bank of India to permanently wipe out Yes Bank’s Rp84.15bn ($1.14bn) Basel III-compliant additional tier one bond left the market in awe of the central bank’s tough stance. But it could be just what investors need right now.
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In the heat of the moment
The stress of Covid-19 is getting to us all. Especially those of us whose main form of exercise is rigorous sitting.
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Soon we’ll know what 'relationship banks' are really worth
Since the financial crash, the crucial part of relationship banking has been pretty straightforward: offer borrowers cheap cash and become a core lender, then pitch for ancillary business. But the disastrous effects of Covid-19 on corporate finance mean that cozy relationships will be tested, with companies under pressure and in serious need of extra cash. We’ll soon know which relationships were real and which were not.
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A crisis built for the SSA market
These are extraordinary and testing times for the global economy. But if there’s one thing that we have learned from past economic crises, it is that public sector institutions are crucial, both as borrowers keeping capital markets open and in their work channeling money to repair economic and human damage, and stimulate growth.
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Japan and the limits of monetary policy
The Bank of Japan (BoJ) has joined a growing number of central banks around the world rushing to solve a problem that is not monetary in nature. Their actions are understandable — but the BoJ offers a clear example of the limits of monetary policy to solve real-world problems.
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A corporate crisis needs a corporate bailout
Central banks are dusting off the 2008 playbook, thrusting liquidity at the banking system and hoping some of it gets through to banks' end clients. It’s better than nothing, but the coronavirus crisis one primarily of corporates — and the rescue toolkit needs updating.
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The man behind the mask: banker spies opportunity
These are troubling times. Covid-19 case numbers are jumping every day, more countries are being added to travel ban lists, and the virus outbreak is now officially a pandemic. But some bankers are still finding the positives in all the chaos.
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Prepared for the worst, hoping for the best
As the coronavirus advances deeper into the US and northern Europe, capital markets have had one of their most shocking and arduous weeks for many years.
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Pandemic threatens M&A pipeline
The coronavirus will depress mergers and acquisitions activity, hurt advisory revenues and change the emphasis of deal-making in 2020, writes David Rothnie.
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UK Budget: with great funding costs comes great fiscal responsibility
What a time to be a new UK chancellor of the exchequer preparing to make your maiden Budget speech, as Rishi Sunak will do on Wednesday. He has motive and opportunity to borrow big and pay little for it. Brexit and the coronavirus outbreak mean a lot of spending will need to be funded to keep the UK economy running. But how the cash is deployed will shape the government's credibility in the eyes of Gilt investors.
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Nationalising Intu would be bold but not reckless
Every time a UK company gets into trouble, the call goes up for a state rescue — calls which the government, sensibly, usually rejects. With the increasingly troubled Intu, however, it might not be the worst idea.
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Too little, too late for NPL reform
Last year was the first since the crisis that European markets ducked under NPL ratios of 3%. It would have been a cause for celebration, if not for the coronavirus outbreak marauding the continent, ready to bring a new generation of non-performing assets to bank balance sheets.
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Asia’s IPO markets need to adapt quickly
Asia’s IPO markets have been hit hard by the coronavirus epidemic, as travel bans and self-quarantine orders have delayed roadshows and brought deal flow to a near standstill. For the listing markets to survive, issuers, ECM bankers and investors need to adapt rapidly — and put some faith in technology.
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Banks vs Covid-19: whatever it takes
Banks are going to play an outsized role in softening the economic impact of Covid-19 in the euro area.
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'Price now' was the right call, finally
Speak to enough sell-side capital markets bankers and a few patterns start to emerge. For all the talk of putting the client first and understanding their needs, the advice from syndicate and DCM shows a certain bias towards doing bond deals.
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JP Morgan seeks solution for deal-making big dogs
JP Morgan’s latest high-level reshuffle has put a crack team of dealmakers at the top of the firm, and opened room for new leaders to come up. But keeping senior bankers happy can be difficult, writes David Rothnie.
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China moves to simplify its bond regulation landscape, but alphabet soup still confuses more than clarifies
China has launched a streamlined system for corporate bond issuance. The move should be applauded — but it further muddies the waters in China’s regulatory system, writes Rebecca Feng.
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Ain’t no party like a bank party
Apologies millennials, but not everything needs to come with an added perk. Whatever happened to banking being boring?
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Coronavirus: monetary policy is not enough
The US Federal Reserve’s emergency 50bp cut in interest rates on Tuesday failed to reassure markets. The US and European response to the Covid-19 coronavirus outbreak needs to incorporate targeted fiscal policy as well.
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In markets, as in society, state power will determine virus resilience
The coronavirus knows no borders — but the response is all about national power. The same will be true in markets.
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Arb funding: a coronavirus casualty
Central banks across the world seem to be heading towards rate cuts, accelerated by the need to mitigate the economic effects of the Covid-19 outbreak. An unintended consequence of this is an increasing scarcity of attractive arbitrage funding opportunities for borrowers. This sort of funding, typically a perk of the best rated borrowers, will concentrate funding risk for them instead — ironically at a time when they should benefit from their safe haven status.
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Middle East sovereigns must follow Egypt’s green example
Middle East sovereigns have been taking their time in getting round to doing green financing, despite many of the region’s companies and banks embracing the shift to sustainability-linked issuance. They have no excuse not to print, and every incentive to cement their commitment to sustainability.
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Novo Banco’s capital request a hit for regulators’ reputations
Novo Banco has requested a capital injection of €1.037bn, much of which will be sourced from the Portuguese state. This shines a bad light on European banking regulators and their mandates.
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China’s social bonds coloured by politics
Bank of China made headlines last week for selling the first offshore Covid-19 linked bond. But the trade's status as a social bond — the first to come offshore from China — got less attention. The transaction shows the potential for social bonds from the country, while raising questions about why it has taken so long to see such a deal.
