Covered Bond House: Barclays

IFR Review of the Year 2013
5 min read

Pole position

Staying on top of a competitive market is no easy task, especially when that market is going through a period of considerable change. For breaking new ground and winning more market share than any other bank, Barclays is IFR’s Covered Bond House of the Year.

It was a tough year for covered bonds in 2013. Lower borrowing needs and the reopening of the senior unsecured market for peripheral issuers drove net covered bond supply down by 40%, pouring fuel on the fire of an already fiercely competitive market landscape for lead managers.

But in that environment, Barclays kept its cool. Allen Appen and his strong team of debt capital markets and syndicate bankers ensured the UK firm was always at hand for inaugural and established borrowers, while extending its presence in newly established markets.

“It’s not all about league tables but in this case our position tells our dominant position in the market,” said Appen, head of financial institutions DCM at Barclays. “We live and breathe covered bonds and it’s deeply embedded in our DNA.”

Looking at the league tables, it’s hard to argue. Barclays is number one in both jumbo issues and across all covered bond deals. In jumbos, the bank had a whopping 10.8% markets share in November, a staggering 420bp above its nearest rival. It has held a consistently strong position despite the fact that Barclays itself has not issued a single deal in 2013.

“Reciprocity is such an important part of the market that issuers that had once given away mandates without strings attached are no longer doing so,” said Appen. “So it is even more important that we have maintained our leadership position without issuing a single covered bond this year and without the assistance of a thriving sterling market.”

The global breadth of Barclays’s market dominance was visible in its activity in Australia and North America – in addition to the bread and butter funding of European issuers.

In Australia and New Zealand, Barclays was the go-to house and helped National Australia Bank push the boundaries in May, when it sold the longest ever public benchmark euro covered bond from either of the two countries. The €750m 12-year bond priced at mid-swaps plus 33bp, allowing the issuer to lock in opportunistic long-dated funding at historically low-yield levels while satisfying investors. Barclays has been joint bookrunner on every Australian euro covered bond deal in 2013.

Canadian powerhouse RBC also needed a safe pair of hands when it returned to the euro market after five years back in July. The Canadian bank priced a €2bn seven-year offering at mid-swaps plus 16bp, the largest covered bond in six months, and opened the door for CIBC to follow it up shortly thereafter and for RBC to return with a five-year offering three months later.

On the inaugural side, Caffil (formerly Dexia Municipal Agency), Kiwibank and Mediobanca all managed to come to the market for the first time this year with the assistance of Barclays.

Commerzbank also turned to the UK firm when it needed to sell its first structured covered bond and the first covered bond backed by SME collateral in February – a €500m five-year that priced at mid-swaps plus 47bp.

Covered bond issuers continued to favour sub-jumbo or jumbolino-sized bonds in 2013, so on the rare occasions banks needed to go for size, a safe pair of hands was necessary.

Barclays acted as bookrunner on all seven of the largest transactions in euros and on the four largest Yankee transactions Barclays took three quarters of the business. Commonwealth Bank of Australia’s US$2bn three-year bond in January and Santander’s €2bn five-year are other highlights.

The rehabilitation of the periphery was an important story this year and when Spanish issuers Bankinter, Kutxabank, BBVA, Santander came to the covered bond market, Barclays was at hand. Similarly in Italy, credits like Mediobanca, UBI Bank and Carige relied on the firm’s advice to issue deals during the second half of the year.

“Barclays will continue to be at the forefront of this market for the years ahead despite the fact that the competition is changing underneath us,” said Appen. “Our support for the product is unequalled and it’s only when you maintain this kind of profile you can stay on top.”

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