North America

US banks this week reported stellar returns from trading and underwriting in the first quarter, even as the bottom line was hit by gigantic writedowns and reserves for credit losses, as the economic and financial disruption from the coronavirus crisis took its toll.

Banks have been building their financial sponsor coverage teams on a record period of deal making. Now they have a different fight on their hands, but bankers are playing down the threat of a 2008-style meltdown, writes David Rothnie.

GSX Techedu, a Chinese kindergarten to 12th grade after-school tutoring platform, has been targeted by a US short-seller for allegedly inflating its revenue. The company has denied the allegations.

The CFO of Banco Santander Mexico told GlobalCapital that the lender had decided to get ahead of a possible surge in demand for credit by issuing the largest ever bond by a Mexican bank on Tuesday. But DCM and syndicate bankers worry that most Latin American issuers are not taking advantage of strong markets to shore up cash positions with the full impact of the Covid-19 crisis still unknown.

US banks ramped up reserves for credit losses, expanded credit lines and enjoyed bumper trading and debt underwriting volumes in the first quarter, according to results released on Tuesday and Wednesday.

Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Tuesday, April 14. The source for secondary trading levels is ICE Data Services.

Royal Bank of Canada on Wednesday became the fourth Canadian bank to issue an Australian dollar covered bond in April, pricing considerably tighter than its compatriots and in the largest size yet. The success the Canadians have enjoyed in Kangaroos is in stark contrast to a sterile sterling market.

Banco Santander Mexico showed that emerging market investors are willing to deploy cash in a greater range of credits than just sovereigns as it sharply increased the size of a five-year senior deal on Tuesday. But though the new issue concession was in line with expectations, the deal underscored the new reality of funding conditions for Latin America borrowers.

HSBC has overhauled the structure of its global banking business for the second time in as many years in a push to cut costs and bring its commercial and investment banking divisions closer together.

The Province of Alberta is preparing for a bigger borrowing programme to counter the impact of the global oil crisis and the coronavirus pandemic.

A large positive move in stock prices in the past three weeks has buoyed many market commentators, but equities bankers and investors are concerned that equity valuations still do not reflect the severity of the economic effects of the Covid-19 pandemic. If first quarter results or a worsening of the virus are bad enough to drive markets lower still, sufficient harm could be done to investor sentiment to slam shut a vital issuance window for companies desperate to raise cash.

Banco Santander Mexico is hoping to become the first Latin American company to issue internationally in six weeks on Tuesday after speaking to investors on Monday about a potential senior unsecured trade.