Intesa keeps AT1 reopening on track
Intesa Sanpaolo kept up the momentum in the euro Additional Tier 1 market on Monday with a €1bn perpetual non-call eight-year transaction that was more than five times subscribed at the peak of demand.
Bankers said it was positive to see that demand for AT1s remained robust even against a less upbeat market backdrop on Monday. Whereas the euro AT1 market was reopened last week amid an enthusiastic investor response to a US-China tariffs deal, on Monday, the move by Moody's to downgrade the US sovereign last Friday loomed over the market.
"It turned out to be a US show, more about US futures, Treasuries and dollars, but not so [relevant] for euros and European financials," said a banker at one of Intesa's leads.
Leads Bank of America, BNP Paribas, Citigroup, Goldman Sachs, IMI-Intesa Sanpaolo, Morgan Stanley and UBS marketed the perpetual non-call May 2033 note with initial price thoughts of 6.875% area. With demand topping €5bn, the leads set the coupon at 6.375% and the size at €1bn. The final book stood above €3.6bn.
Bankers noted the 50bp of price tightening matched the progression of the two euro AT1s that reopened the market last week: a €1bn perpetual non-call 7.4-year from Erste Group that was also priced at 6.375% and a €1bn perpetual non-call six-year from Sabadell priced at 6.5%. The final demand for Intesa's deal was lower than the respective €4.25bn-plus and €6.8bn-plus books for last week's trades, while still sufficient to cover the deal several times over.
Bankers said the deal should maintain the positive momentum of the AT1 market following its reopening and were optimistic it would perform well on the secondary market, though some noted that Erste's deal had underperformed and was trading below par at 99.5 on Monday, while Sabadell's deal had held above par. Erste's deal was priced with a slimmer new issue premium of up to 12.5bp, while Sabadell's deal was deemed to offer a premium of around 25bp.
Intesa Sanpaolo also landed close to its curve. The bank's €750m 5.875% perpetual non-call September 2031 AT1 was bid at a yield-to-call of 5.7% on Monday, according to LSEG, while its €1bn 7% perpetual non-call May 2032 AT1 was bid at 6.08%
Some bankers, both at and away from the leads, said the final coupon incorporated a 12.5bp new issue premium, though some away from the deal deemed it to be flat to fair value.
The deal ultimately priced with a reset spread of 403.8bp, which is the tightest of any of Intesa's AT1s and just a touch wider than Erste's reset spread of 400.8bp.
"That's a great outcome for Intesa and it highlights again the fact there is no longer a core versus southern European gap," said the lead banker.
Insurers to the fore
Elsewhere, French insurer Groupama Assurances Mutuelles made a rare appearance in the primary market to sell a €500m 10-year Tier 2.
The no-grow deal was marketed with initial price thoughts of mid-swaps plus 220bps area, via bookrunners Barclays, BNP Paribas, Citigroup, JP Morgan, Morgan Stanley and Natixis. The bookrunners went on to set the spread at 190bp after orders surpassed €2.5bn. The final book topped €2.6bn.
A banker at one of the leads said fair value was in the context of 185bp–190bp, though fair value was difficult to accurately ascertain given the rarity of the issuer.
The deal is Groupama's first Tier 2 issuance since September 2019, though it was active in the primary market last year, selling an inaugural €600m Restricted Tier 1 in July.
Meanwhile, the only euro-denominated senior unsecured offering in the financials sector on Monday came from US insurer Athene, which launched a two-year floating-rate funding agreement-backed note.
The size of the book for the €500m deal was not disclosed and, after four hours of marketing, leads Barclays, BNP Paribas, Deutsche and JP Morgan set the spread flat to the IPTs at three-month Euribor plus 85bp.
More insurance company supply is in the works. On Monday, Aviva named Citigroup, Credit Agricole, Deutsche Bank, Santander and Societe Generale as lead managers for a €600m no-grow 31.25-year non-call 11.25 Tier 2 transaction.
The insurer held a series of investor calls on Monday afternoon to market the deal.