Barclays, BNP Paribas, Credit Agricole, Credit Suisse and Société Générale all finished 2013 with higher league table positions in euro-denominated emerging market international bonds than they did for EM bonds of all currencies.
It follows that with an increased proportion of issuance in this currency — and of course with all other things remaining equal — these banks should be riding higher in EM league tables by the end of 2014. This would provide gratification for some of these banks — such as BNP Paribas and Société Générale — that have made a concerted effort in the emerging markets in recent years.
In CEEMEA the swing to euros has been even more prominent because of the issuers’ natural euro funding needs. For that region, in 2013 HSBC, Société Générale, ING, Gazprombank and Credit Agricole held higher positions in the euro-denominated bond league table than for total CEEMEA bond issuance. Logically, those banks are the ones that stand to benefit from a surge in euro paper.
It would be rather a stretch to extrapolate anything approaching final league table positions for 2014 from the first three weeks of the year, but this year so far, BNP Paribas, Unicredit and Société Générale are all within the top four for CEEMEA bonds for all currencies, albeit with Citi leading that table. In the first few weeks of this year, dollar issuance has so far been very thin on the ground.
This is not to say that the traditional group of strong EM banks that do not feature in these lists will struggle to maintain their positions this year. There is typically a huge jump in volumes placed by the top three banks versus the rest of the table and EM banking giants such as Citi and JP Morgan will not easily be displaced. And of course, they too have more than adequate distribution networks across Europe that they can put to work.
But their market shares could suffer and some challengers to their positions could emerge with more a greater surge up the top 10 rankings than might have been anticipated.
The increased supply of euro paper needs to continue for the league table shake-up to take hold. That seems likely to a number of senior EM bankers who see this as the year that euro issuance comes of age in emerging markets, even if nobody expects it to displace dollar issuance as the main currency of choice for the asset class.
The banks that are strong in euros do have an opportunity this year though — not just to move higher in the league tables through placing euro-denominated bonds but also to kick the door wide open for themselves throughout the emerging markets with the increased visibility their euro mandates will earn them.
If the supply of euro-denominated paper continues, there could be a serious shake-up among the banks that consider themselves the market leaders. The old guard may well have to fight to justify their place.