Europe Financial Bond House: UBS
Keeping the crown
In a year when competition to lead the FIG pack was more ferocious than ever, UBS fought off its peers and retained the crown it first won in 2015. For its acumen, ubiquity and consistency, UBS is IFR’s Europe Financial Bond House of the Year.
If 2015 was about UBS’s momentum, 2016 was about the consolidation of its leadership by steering clients safely through a market littered with idiosyncratic and regulatory risks.
“We proved ourselves to be the go-to house for banks and insurance clients in a year when, from a market perspective, there was a lot of event risk, and from a capital management perspective, a lot of curve balls,” said Amir Hoveyda, global head of debt capital markets and clients solutions.
“We had to be versatile in what we offered, and in terms of market access. We did that better than anyone else.”
Prized mandates for Additional Tier 1 deals, the riskiest form of bank capital, might have dominated the agenda in recent years but supply in 2016 dwindled after a brutal first-quarter sell-off.
UBS itself conceded that AT1 was far from the story of the year – but it dominated that sector anyway. It was lead manager on eight out of 10 benchmark euro or Reg S dollar trades over IFR’s awards period, reopening the European market in January with Intesa Sanpaolo’s inaugural euro trade and again in March and August with self-led deals for UBS Group.
The bank was also on hand to help its clients navigate requirements demanding higher buffers of loss-absorbing debt. For many European countries the rules are still up in the air, but UBS stood at the ready to help those that could move early.
Swiss and UK banks largely paved the way, issuing billions in senior debt through their holding companies. UBS helped Santander UK to price an inaugural €1bn holdco senior offering and RBS to bring a €1.5bn re-entry holdco senior trade.
Liability management also emerged as a crucial tool to buy back inefficient opco debt, an area that UBS made its own. It acted for Santander UK, RBS, Bank of Ireland as well as UBS itself, capping that with an opco-holdco exchange for Lloyds, heralding the bank’s entry into the single currency in a holdco senior format.
UBS also dominated the Tier 2 segment, which became the logical solution for many European banks in the absence of clarity on the incoming Minimum Requirement for own funds and Eligible Liabilities (MREL), Europe’s version of TLAC.
UBS sold debt for the likes of Banco de Sabadell and Belfius as well as more established names such as Nordea and ING.
That ING Bank bond, for which UBS was global coordinator, incorporated one of the year’s chief innovations: an optional redemption that allows the bond to flip into ING Groep in case of regulatory changes. UBS itself pioneered a senior bond with a par call to increase the note’s regulatory efficiency, the first of its type sold in Europe.
The bank held its own in the traditional funding market, migrating transactions from one format to another to best fit its clients’ needs. UBS argues that its product-agnostic approach forms the bedrock of its success while its advisory capabilities are paying dividends behind the scenes.
UBS is increasingly proving to be a heavyweight in the insurance sector, despite limited lending activity compared with some of its peers.
“We have progressed significantly in terms of wallet share and are the leading non-lending bank. Insurance companies are the corporates of the FIG sector: you have to pay to play,” said Hoveyda.
“We bring the same approach to our insurance clients as our bank clients and have no choice but to be the best. We have come to a position where we don’t shy away from having grown up conversations with our clients.”
UBS made the top line of Prudential’s Reg S US$1bn 5.25% perpetual non-call five, which spearheaded a US$5bn wave of issuance in a notoriously ephemeral market. Sterling and euro deals for the likes of Hiscox, Swiss Life and Generali bolstered its credentials.
The strength of the franchise is also bearing fruit in previously weaker areas. Nordic coverage has improved significantly, for example, to the extent that DNB awarded UBS an AT1 mandate after the bank shook up its coverage of the Norwegian lender, and took it on an Asian roadshow.
“UBS can’t be pigeon-holed any more,” said Vinod Vasan, co-head of debt capital markets client solutions in Europe, the Middle East and Africa.
“We’re a great capital house, but also do liability management, funding, covered bonds, insurance, and are relevant across the piece.”