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Monday, 20 November 2017

Covered Bond House: Credit Agricole

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Getting to the top

It can be hard to stand out in the covered bond market, a well-oiled machine in which nearly every European bank and others beside play, but Credit Agricole has climbed to the top of the pile after many years of hard work. For its momentum and mettle, Credit Agricole is IFR’s Covered Bond House of the Year.

At the end of 2010, Credit Agricole was languishing outside the top 10 in the covered bond league tables. Six years later, it has fought its way into top position for euro covered bonds and second for all currencies, according to Thomson Reuters data.

“We’ve been extremely committed to the asset class,” said Jean-Luc Lamarque, global head of syndicate. “This is the achievement of six years.”

Lamarque credited that progress to Credit Agricole’s “impressive set-up”, comprising sales and trading capabilities as well as the syndicate desk. Its research team continues to be at the forefront of market analysis, led by Florian Eichert, who drives lobby efforts on issues such as harmonisation and Basel IV as part of his role on the European Covered Bond Council steering committee.

“It adds to the overall commitment of the bank to the asset class,” said Eichert.

The roster of first-time business won over IFR’s awards period was the result of years of groundwork finally bearing fruit, with the likes of DNB Boligkreditt, Sparebank 1 Boligkreditt, Deutsche Pfandbriefbank and Abbey National Treasury Services all awarding mandates to Credit Agricole for the first time.

The bank also made further inroads beyond its European backyard into Canada, running deals for Toronto-Dominion and Bank of Montreal for the first time. Having carved out a niche in the Green bond market, it won the mandate for Caja Rural de Navarra’s €500m seven-year sustainable covered bond.

Repeat business from the likes of Lloyds and Deutsche Bank SAE, including that entity’s inaugural public trade in November 2015, is testament to the level of trust built up among issuers.

Though typically seen as one of the strongest and steadiest bond markets, the covered sector still provides opportunities for lead managers to stand out and Credit Agricole helped issuers to price many of the year’s milestone trades.

The bank was on the top line for a groundbreaking €500m three-year from Berlin Hyp, for example, the first covered bond to price at a negative yield. It proved that such trades could find investor demand – a major point of debate for much of the year.

“We were pushing issuers to do negative yields,” said Vincent Hoarau, head of financial institutions syndicate.

Italy hit the headlines throughout 2016 as its banking sector teetered on the brink of a full-blown crisis, but Credit Agricole guided UniCredit into the market with a €1bn 10-year in August, the first public transaction from the country since June and the tightest Italian benchmark covered bond this year (up to November 15). 

In Austria, Credit Agricole helped Raiffeisen-Landesbank Steiermark sell the second Austrian covered of 2016 (after national champion Erste), despite the Heta debacle still casting a shadow over the sector. The bank also guided Abbey, Nationwide and Lloyds into the market in the months leading up to the UK’s Brexit vote.

The bank appeared on multiple dual-tranche transactions, allowing issuers to make major dents in their funding targets. A €1.5bn dual-tranche trade for Caisse Francaise de Financement Local (Caffil) reopened 2016’s euro financial market, for example, while the 15-year tranche of a €1.5bn deal for Cariparma was the longest Obbligazioni Bancarie Garantite ever issued and the first 15-year from a non-core country.

It was also among the lead managers for ABN AMRO’s €2.25bn 15-year, for many market participants the deal of the year and the biggest single-tranche covered bond since 2012. Bank of Montreal was not far behind with a €1.75bn seven-year, also led by Credit Agricole.

The bank’s crowning glory was an unusual combined tender offer on Credit Agricole’s own covered and Tier 2 debt that also incorporated a consent solicitation to switch outstanding covered paper from a hard to a soft maturity. The exercise was capped off by a mammoth €3.25bn seven and 15-year dual-tranche trade.

“As a package, it’s quite exotic,” said Hoarau. “It was one of our key achievements.”

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

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