AT1s: still going through changes

Can a bank ever really be certain about its interpretation of the perfect capital structure?

  • By Tyler Davies
  • 27 Jun 2019
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Commerzbank broke a long-observed silence this week, when it said it would be issuing its first ever additional tier one (AT1) bond.

The German lender is one of the main missing pieces from a market that has grown to a size of nearly €180bn over the past five years or so.

Explaining its decision to join its peers, Commerzbank said a new issuance in the format would help it to “optimise its capital structure”, particularly in light of “changes in regulatory requirements”.

There was no use in the bank waiting for further clarity on the regulatory status of AT1 debt.

It is true that the case for issuing in the asset class was made clearer in 2018, after the European Central Bank said it would stop firms from taking the common equity tier one (CET1) resources they use for Pillar 2 capital demands and “double counting" them to plug shortfalls in AT1 capital.

But market participants have long known that the product is useful in minimising the need to have large stocks of expensive CET1 funds on the balance sheet.

Besides, there is little reason to think that the rules about AT1 are going to remain exactly the same for a significant time.

Ironically, Commerzbank even managed to stumble on the big lingering regulatory uncertainty in the market with its long-delayed mandate this week.

It has chosen to issue an AT1 with a low CET1 trigger of 5.125% — something that many bank capital experts, including Germany’s Bundesbank, think is no longer fit for purpose.

Indeed, the regulatory value of different AT1s could well end up being as up and down as their market values.

  • By Tyler Davies
  • 27 Jun 2019

All International Bonds

Rank Lead Manager Amount $b No of issues Share %
  • Last updated
  • Today
1 JPMorgan 701.92 3124 8.23%
2 Citi 674.68 2747 7.91%
3 Bank of America Merrill Lynch 582.52 2267 6.83%
4 Barclays 511.11 2040 5.99%
5 Goldman Sachs 438.40 1653 5.14%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $b No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 39.65 182 7.04%
2 Credit Agricole CIB 37.82 159 6.71%
3 JPMorgan 30.63 81 5.44%
4 Bank of America Merrill Lynch 26.29 78 4.67%
5 UniCredit 26.02 140 4.62%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $b No of issues Share %
  • Last updated
  • Today
1 JPMorgan 11.04 74 9.49%
2 Morgan Stanley 10.59 51 9.11%
3 Goldman Sachs 9.63 50 8.28%
4 Citi 7.78 60 6.69%
5 Bank of America Merrill Lynch 5.53 30 4.75%