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Sunday, 17 December 2017

EMEA Financial Bond House: Deutsche Bank

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Whether it was peripheral banks returning to the market, insurance companies seeking to issue grandfathered Tier 2 capital, banks raising landmark AT1s, or lenders preparing for TLAC, one firm was there to offer a steady hand. Deutsche Bank is IFR’s EMEA Financial Bond House of the Year.

Deutsche Bank, with its 40-strong team of FIG bankers, outflanked all of its rivals in the EMEA region during 2014. The numbers speak for themselves: Thomson Reuters data show the firm sold more FIG products in euros than anyone, with €22bn of deals and a 9.1% market share.

The German bank carved out its own path during the year. While some focused their efforts on the burgeoning Additional Tier 1 market, Deutsche was busy pitching the broadest range of products – a strategy that paid off when clarity around total loss-absorbing capital emerged later in the year, sparking a flood of new issuance in a variety of instruments.

“We are not just pitching a product, we are talking to clients about their overall capital structure,” said Gerald Podobnik, head of capital solutions. “This has become all the more important now that banks are focusing on TLAC.”

Still, Deutsche had quite a task to differentiate itself from its competitors in senior unsecured and covered bonds.

In Ireland, it was hired by the two largest banks to access the market but its crowning glory was the advice it offered to Bank of Ireland when it sought to repay its state aid. Deutsche helped to re-market €1.3bn of state-owned preference shares, allowing the Irish lender to break free from the clutches of a government that supported it through the financial crisis.

In Iceland, Islandsbanki turned to Deutsche to help it sell the first euro-denominated bank bond since the country’s financial collapse, placing a small short-dated issue less than a week after domestic rival Arion Banki shelved plans for a larger euro deal. Islandsbanki, created after the crisis and 95% owned by Glitnir, priced a €100m two-year bond issue that offered investors a 3% coupon.

In Greece, Deutsche helped Piraeus to return to the public bond market – the first from a Greek bank in more than four years – paving the way for the country’s banks to stage a return to market. The deal was a €500m three-year priced with a 5.125% yield. The order book was six times subscribed.

“The whole Greek market was relying on Piraeus, whose success enabled NBG and Alpha Bank to follow on,” said Derek Mills, head of financial institutions syndicate

For the more established players in the senior unsecured market, Deutsche noted a potential for spread tightening in the first quarter of 2014 and advised clients to move swiftly. It encouraged the likes of AIB, Veneto Banca, Intesa, UniCredit, BES and BBVA to pull the trigger on deals.

“When it comes to the strongest FIG house I think few could argue with Deutsche,” said a banker from a rival house. “Derek Mills is considered the voice of reason and often breaks with the common view to provide caution. When the market really turns, that’s when Deutsche Bank will show its true worth.”

In the capital world, 2014 was a year of Additional Tier 1, Tier 2 and insurance subordinated debt. Again, Deutsche excelled in this area, helping the likes of UBS, Swedbank, Aareal, BFCM, SEB, LBBW and Intesa to beef up their capital.

In the liability management space, Deutsche helped Groupama’s refinancing of two perpetual note issues. The resulting deal (€1.1bn of perpetual non-call 10-year subordinated bonds issued in line with guidance at 6.375% in May) was the first in what turned out to be a wave of insurers looking to raise perp notes that they hope will be grandfathered as Tier 1 capital under Solvency II.

“Insurance has always been the steady cousin of the banking industry but in 2014 it became a huge trend,” said Podobnik.

In the Additional Tier 1 space, Nationwide and Societe Generale looked to Deutsche for help and the bank was involved in Lloyds’ mammoth exchange of its ECNs.

As an issuer it also opened doors for others. Deutsche itself sold the first triple tranche AT1 offering in the primary market, selling a whopping €3.5bn equivalent to investors that placed more than €25bn of orders.

“In AT1, insurance and everything else, Deutsche Bank and euros are synonymous,” said Vinod Vasan, global head of FIG origination.

To see the digital version of the IFR Review of the Year, please click here.

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

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