BNP Paribas stood out this year in the euro market for SSAs. In unprecedented market conditions it delivered clients its execution capabilities for the huge increase in funding required, advice around both approaching the market and the new focus on social and sustainable bonds, and its strength in the long end of the curve.
“We’ve clearly faced unprecedented market conditions this year and during those times issuers obviously had a lot more execution risk than normal,” says Jamie Stirling, global head of SSA debt capital markets. “BNP Paribas is the leading European bank, and the leading bank in euros, so when issuers needed to raise money very quickly and in enormous size, they turned to a bank they could genuinely rely on.”
The bank acted as a joint lead manager on fully half of the 40 euro sovereign deals in the second quarter — and over two-thirds of the €157bn total euro sovereign deal value in the period.
A virtuous circle developed, says Fred Zorzi, global head of primary markets. “The market share increase we had on the primary side helped fuel market share gains on the secondary side, which again helped the primary business.”
The big late-spring issuance rush brought an astonishingly fast development of social and sustainable bond issuance from SSAs, in particular Covid-branded issues. Borrowers brought 16 of these novel deals in the second quarter, totalling €32.5bn — and BNP Paribas was a bookrunner on 13 of them that totalled €30.5bn of issuance.
“Getting the right size and price for issuers is important but we were also leading with advisory — whether in terms of market timing or on structuring, and especially on the social response elements of deals,” says Stirling.
A recent deal for Cades was an example of how the combination of execution capability and the advice around the ESG side interact to help issuers, says Stirling. Cades, the French agency which was given new responsibilities for social debt transfers in the summer, issued an inaugural €5bn 10 year social bond at the beginning of September. “The social element of the deal was crucial in increasing the size the issuer could take from the market while reducing the execution risk,” he says.
But there’s more to BNP Paribas’s game than advice, structuring and execution. “We were duration manager on a disproportionately large number of deals that we were lead manager on,” says Stirling. “Clients understand that having someone doing the small things like that where we can offer a complete service in a tough market is important.”
Another key feature of BNP Paribas’s activity in euro SSAs has been the tremendous volume it has done at the long end of the curve. While a lot of sovereign issuance has been concentrated in the 10 year plus maturities because of the effects of low absolute yields, BNP Paribas has been particularly prominent and it has a market share of well over 10% in the 30 year plus ultra-long segment.
Even so, it wants to be active across the market. “We are a diversified franchise, and a true European bank,” says Zorzi. “Our unique position has helped us with SSAs in euros because we can show them all types of products, whether conventional or linkers across all jurisdictions.”
One of example of how it leveraged that pan-European position came in May when its Italian franchise gave it a place as a bookrunner on the BTP Italia — the biggest ever in the inflation-linked retail series, weighing in at €22bn.
It also means that there is commitment to the primary dealer business right from the very top of the bank. “The chairman’s view is that we have a systemically important role to help the European sovereign issuers whether or not it is the most profitable business,” says Zorzi. “It’s fair to say that the bank believes in Europe.”
The sovereigns business is also distinguished by the way Zorzi’s teams have created a continuum between the emerging markets business run by Alexis Taffin de Tilques and Stirling’s SSA business. “We make sure knowledge is shared, so of course a France or Belgium will approach the market in a different way to a Ukraine or Egypt, but we still find synergies because a lot of the problems faced by sovereigns are faced in common,” says Zorzi.
