With covered bonds one of the hottest products in the global capital markets, ABN has had to fight hard for top spot, Neil Day reports.
With Eu135bn of issuance in 2005, a record breaking first quarter this year, and around Eu155bn of deals forecast for 2006, the jumbo covered bond market is a mouth-watering prospect.
So much so that banks are stumbling over each other to grab a slice of the covered bond cake, which seems to keep on growing.
But while the prospect of mere crumbs are enough to tempt some banks into the market, enjoying the biggest helping at the head of the table is ABN Amro. The bank has occupied the position since the beginning of the year, having gained the edge over arch-rival Barclays Capital, which was number one in 2005.
Five years ago ABN Amro was not even in the top 10 leading bookrunners of covered bonds. The key to its success appears to have been successfully harnessing the diverse capabilities within a bank that are necessary to be a leading player in the covered bond market.
Mauricio Noé, head of covered bonds, says an example of this was when ABN Amro merged its consumer ABS business and financial institutions group (Fig) debt capital markets team to form Fig capital markets in February.
"Structuring and origination are very closely linked," Noé says, "so arranging covered bond programmes and opening up new markets is second nature for us."
Further down the supply chain, Paul White, global head of syndicate at ABN Amro in London, oversees debt syndicate, public sector and parts of covered bond origination, as well as flow trading, which includes agencies and covered bonds. "It is therefore a very smooth process from origination to syndication to trading," he says.
The bank's five-strong flow trading team is based in Amsterdam, working closely with ABN Amro's derivatives traders. The Dutch bank is the largest market-maker in non-German covered bonds, and in another key growth area: covered bonds of seven years and longer. It is also moving with the times, trading on three inter-dealer electronic platforms and six client-facing ones.
ABN Amro is not only the top bookrunner of euro denominated jumbo covered bonds this year, but in 2005 led more covered bonds in other currencies than any other bank.
"For us that is the real jewel in the crown," says Noé — "giving the investors what they want in their own currencies, as well as diversifying funding sources for issuers."
Despite its successes, ABN has had to face the same challenges as its peers in the covered bond market, one of which is executing cédulas hipotecarias in the midst of heavy Spanish supply. One of the highlights of the year for ABN Amro was therefore the smooth execution of a Eu5bn deal for La Caixa in early January, split into 8-1/2 and 15 year tranches.
"It has been a tough market," says Jeremy Walsh, head of frequent issuer syndicate, "but with the right approach deals can still be oversubscribed and successfully executed."
On the research side, the bank has at its disposal head of asset backed securitisation and covered bond research Christoph Anhamm, one of the most experienced analysts in the sector, and since last year Sabine Winkler.
Rather than adding to the reams of research that fill market participants' email inboxes every week, the two focus on producing bespoke, incisive research.
|Key staff: Mauricio Noé (head of covered bonds), Jeremy Walsh (head of frequent issuer syndicate), Paul White (global head of syndicate), Christoph Anhamm (head of asset backed securitisation and covered bond research)
Important hires in past year: Miguel Pinto, director; Christian Rose, director; Mark Lindon, director; Simon Holz, associate; Sabine Winkler, associate (internal hire); Zoltan Voros, associate (internal hire)
Best deal of 2006: La Caixa Eu5bn two tranche cédulas hipotecarias in January
League table positions (2001-05): outside top 10, 8, 7, 4, 2