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Friday, 24 November 2017

SSAR Bond House: Goldman Sachs

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  • When stars align

When stars align

In 2013 Goldman Sachs was best placed to guide peripheral issuers back to market and offer alternative sources of arbitrage to the sector’s main players. For being a savvy operator in a market dominated by balance-sheet behemoths, Goldman Sachs is IFR’s SSAR Bond House of the Year.

Balance-sheet constraints and demanding return on equity targets meant banks had to box clever with limited resources in the high-volume, low-margin public sector business in 2013. Many opted to scale back, while some completely threw in the towel on certain parts of their coverage. In contrast, Goldman Sachs – a firm that rivals love to hate, but grudgingly respect nonetheless – excelled.

“We’ve always been focused on making our SSAR business make sense on a standalone basis,” said Martin Weber, head of EMEA debt capital markets at the bank. “It is no coincidence that this year the stars aligned for our product offering.”

Goldman has always claimed not to be overly concerned with market share – possibly because it hasn’t had much to shout about in recent years – but in 2013 it has been the most impressive league table climber.

For the awards period, Goldman was ranked third in terms of overall market share, excluding US agencies. More impressively, it was one of only two banks that could boast a top five position in both of the main benchmark currencies – US dollars and euros.

Moreover, it stands out as the only traditional investment bank in the upper echelons of the table. This represents quite a feat in a world where regulatory pressures are forcing banks to build up colossal liquidity buffers, turning bank treasuries into some of the largest buyers of SSAR products this year. Houses that can leverage orders from their own bank treasuries to win mandates have a clear advantage.

Instead, Goldman found other ways to service its clients, offering competitive arbitrage opportunities through its broad distribution platform. One notable example came in the short-dated floating-rate market, where the bank used its access to US money market clients to place a sole-led US$1.5bn two-year FRN for the World Bank on just the second business day of the year.

Sweden, which had higher than expected US dollar funding needs this year after a request from its central bank to bulk up its foreign currency reserves, was another issuer to rely heavily on Goldman to place its paper. The bank featured on Sweden’s US$3bn five-year and €4bn five-year bonds, the latter of which was the country’s largest deal since 2009.

Shining on the periphery

But it was on the defining theme of the year – the return of peripheral European sovereigns to market – where Goldman really came into its own. Tellingly, it was the only bank involved in the first new transactions for Italy, Spain, Ireland and Portugal.

Its detractors may argue that mandates for sovereign syndications are simply rewards for a bank’s high ranking in primary dealer tables, a position gained by subsidising auctions.

But for the likes of Ireland and Portugal, countries that were shut out of capital markets after accepting EU bailouts, this argument holds little weight. Goldman made it on to the top line for both critical comeback trades.

To see the full digital edition 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

Ireland’s deal set it on the path to exit its bailout programme at the end of 2013, while Portugal’s gave the market some confidence it could tackle its hefty refinancing burden.

Goldman was also on its fair share of record deals in the supranational and agency space. It executed the largest ever non-sovereign deal in the form of the EFSF’s €8bn five-year, the largest ever 20-year transaction for the European Investment Bank, and the largest ever seven-year bond for German development bank KfW.

And while its focus is principally on the two main currency benchmarks, Goldman also enjoyed a strong showing in sterling as one of the few non-UK clearers to win repeat mandates for the much-coveted UK DMO syndications, as well as placing bonds for Network Rail and Deutsche Bahn.

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