Financial Capital House: Morgan Stanley
Reaping the harvest For its stewardship in an unprecedented year of prosperity and plenty in the primary market for bank and insurance capital transactions and building a market-leading position founded on full-house advisory expertise and diverse coverage, Morgan Stanley is IFR’s Financial Capital House of the Year.
After 2023 saw the viability of Additional Tier 1 bank capital called into question with the collapse of Credit Suisse, 2024 proved to be the product’s year – and with it, Morgan Stanley.
A remarkable wave of post-summer AT1 issuance from European banks powered yearly volumes to levels not seen since the birth of the asset class a decade ago.
Morgan Stanley was at the forefront throughout. In September, the busiest month ever for AT1 supply, the US bank was a lead manager on all but one of the major currency transactions to clear the market, excluding those that were sole self-led.
Morgan Stanley’s stellar record in winning the mandates, widely acknowledged to be the most coveted in the FIG sphere, is the result of years of work, not just by the debt capital markets team but the broader investment bank, including advice given to clients on broader capital planning and loan and equity solutions.
“Our success in capital issuance this year reflects our success in advising clients as well as in leadership in markets and execution,” said Alex Menounos, global co-head of investment-grade DCM.
Charles-Antoine Dozin, EMEA co-head of investment-grade FIG debt capital markets, said the record AT1 volumes were a harvest reaped from “seeds planted years ago”.
Dozin highlighted discussions with bank C-suite executives and treasury teams around the optimisation and distribution of excess capital positions stretching back to the lifting of the Covid-19-era dividend ban, and background work in areas such as supporting issuers in getting regulators comfortable with early buybacks of capital bonds, which was key to many of 2024’s successes.
In primary execution, Morgan Stanley’s leadership was evident in many market reopening transactions.
It led ABN AMRO's €750m perpetual non-call 10-year AT1 that fired the starting gun for the September supply wave, cutting the coupon to 6.375% from initial price thoughts of 7% area, then the lowest coupon of the year for a euro AT1, after demand passed €5.3bn.
It was a lead on the first euro AT1 after snap French elections, a €400m 7.25% perpetual non-call seven AT1 in July from Banco BPM, and also on the first deal after the US presidential election in November.
At a time when issuers had been ready to shelve capital issuance plans until 2025 after some trades had struggled to perform, Morgan Stanley led a €1.25bn 12-year non-call seven Tier 2 trade from Intesa Sanpaolo. It also led the first Tier 1s, a US$1.5bn two-part AT1 from Banorte, a €500m perpetual non-call March 2030 AT1 from BPER Banca, and a €400m perpetual non-call seven-year Restricted Tier 1 from Athora.
Some market participants had thought the AT1 market to be effectively shut in November, but Morgan Stanley’s market intelligence and canvassing of investors made the difference, said Matteo Benedetto, EMEA co-head of investment-grade syndicate.
“We are effectively the eyes and ears for the market on both sides of the equation,” he said.
With that insight, Morgan Stanley repeatedly led banks to highly impressive pricing outcomes.
Take Nordea’s US$800m perpetual non-call March 2032 AT1 in September, which secured the third-tightest reset spread on record for a US dollar European AT1, landing at 266bp.
Morgan Stanley was also sole structuring adviser on Alpha Bank’s €300m perpetual non-call June 2030 AT1 in September and guided it to the tightest ever Greek AT1 at 7.50%.
The roll call of financial institutions to award Morgan Stanley repeat capital mandates in 2024 speaks to the bank’s European reach, with ING, ABN AMRO, Athora, Intesa Sanpaolo, UniCredit, Lloyds, Rothesay Life, AIB, Bank of Ireland and KBC all among them.
Looking to less active European jurisdictions and beyond, the bank played a leading role in a wave of bank capital transactions from emerging market issuers – from Tier 2s for CEE lenders Luminor and NLB to AT1s from Riyad Bank and Yapi Kredi.
The bank also supported infrequent or rare issuers in ensuring market access for more difficult trades, such as the sole-led €150m AT1 from Van Lanschot and Luminor's €200m Tier 2.
“We pride ourselves on being the bank of benchmark transactions, of splashy public issuances … but we are also the bank over the last few years that has managed to unlock complex, challenging and esoteric situations,” said Vittorio Monge, also EMEA co-head of investment-grade FIG debt capital markets.
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