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Unsecured FIG still a tough sell for all but the best

The euro market for senior unsecured bank debt may be slowly improving, but wholesale funding is still challenging for many who need it.

From the choppy first week this year, when bank borrowers had to have at least one double-A rating to get a senior unsecured deal away, the euro market has gradually warmed up. True single-A rated borrowers Crédit Mutuel Arkéa, Credito Valtellinese, Raiffeisen Bank International and Swedish National Housing Finance Corp have all been able to tap the market in the last two weeks.

Market tone is definitely on the up: one FIG syndicate banker declared on Tuesday that the market was the best it’s been in 2011. Indices and spreads are on a tightening track, with the Markit iTraxx Europe Senior Financials index at its lowest level all year.

But some banks still struggle to access wholesale funding in euros. Italy’s Banca Popolare di Milano stepped back from the market last week after starting execution of a two year FRN. And Spanish banks — not to mention the Portuguese — have been conspicuous by their absence in the senior unsecured market this year.

In Spain, Banco Santander and BBVA are considered the top issuers, and would normally be the first from the country to come to the senior market. But, with their secondary spreads trading wider than previously, the senior unsecured market is understandably unappealing.

The pair will be hoping their spreads follow their tightening trend — although with last year’s quickly opening and closing market as a precedent, they are unlikely to want to wait too long. Both are due to release financial results in the first days of February, and FIG syndicate officials expect the institutions to look at tapping the market once they come out of their black-out periods.

As for other Spanish banks, as well as second tier names from elsewhere Europe, the solution is not quite so clear.

The year is looking to be a tricky one for treasurers at second tier European banks: they need to be exploring options for funding where and when they can.

That, and willing a speedy recovery to the ailing eurozone.

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