Europe Financial Bond House: HSBC

IFR Awards 2019
4 min read
Tom Revell

The right notes

For getting a tune out of every asset class and major currency in a year of troubled mood music, HSBC is IFR's Europe Financial Bond House of the Year.

Over the past year, HSBC has been ever-present at the top end of European FIG league tables, thanks to a franchise that can lean on global reach, far-flung sales and trading presence, and structuring expertise.

In the FIG space it sits in first place in euros, second in sterling, and fourth in Reg S US dollars, excluding self-led deals.

But more impressive than the sheer volume is that HSBC hit no wrong notes.

While the past year has been interrupted by volatility and geopolitical concerns, credit markets have, for the most part, remained open. But the financials space has nevertheless seen an unusually large rogues gallery of pulled trades.

Against the changeable backdrop, and with investors pushing back at times, it has been easier for misjudged timing or pricing to scupper trades.

HSBC stands alone among its rivals at the top end of the FIG league tables in having no pulled trades on its record.

The key, said Adam Bothamley, the bank’s global head of debt syndicate, has been keeping up with investors' fluctuating interest and making sure a deal is targeting the right pockets of demand.

HSBC still had difficult trades. For example, a €1bn 10-year senior non-preferred for SEB that saw its book collapse after the price was pushed too far, or a much-criticised Santander Additional Tier 1 transaction, both of which required lead manager involvement to get over the line.

But HSBC cite both as examples of the house standing by its client and doing whatever was necessary to support deals, both during and after execution.

"From a DCM perspective, we achieved what the issuer wanted," said Bothamley.

The year was particularly challenging for UK issuers, with Brexit uncertainty a near-constant. HSBC helped UK banks, building societies and insurers navigate that risk and access sterling, euros and US dollars.

HSBC consistently identified narrow windows throughout the year, helping issuers from Virgin Money to Royal London get deals away swiftly and clinically.

It also offered its sterling expertise to help a diverse mix of non-UK issuers take advantage of highly attractive funding costs in the market in a year in which US dollar issuance conversely declined in importance.

More broadly, the plunge into historically low and, in some sectors, negative yields has challenged financial issuers across the board.

Hugo Moore, HSBC’s head of frequent borrowers and covered bonds, said issuers had three options: "Go long, go for other currencies, or go for it".

HSBC was one of the only houses active in offering issuers all three options, said Moore.

The bank helped Skipton Building Society secure the UK's first negative-yielding covered bond, and guided MuenchenerHyp to the US dollar market for a three-year covered that was off the table in euros, for example.

HSBC played a leading role in the continued roll out of TLAC/MREL issuance and the first round of Additional Tier 1 refinancings, both key themes over the last year.

It also had a hand in multiple AT1 debuts, guiding issuers from La Banque Postale to LeasePlan and LBBW to the market.

Most notable of all was Commerzbank's inaugural US$1bn Reg S issue, a roaring success with a US$10.5bn book and IFR's Europe Financial Bond of the Year.

"That was the deal the market had been waiting a long time for and it exceeded both price and size expectations," said Christoph Hittmair, HSBC’s global head of FIG debt capital markets.

Capital optimisation was also a major topic for insurers, and HSBC was at the forefront, leading trades including RT1 debuts for Achmea and Aegon.

HSBC also ran deals from ASR Nederland and Hannover Re that introduced flexible par calls to the euro FIG market, a concept subsequently picked up by other banks.

HSBC held on to the top spot in the covered bond market in terms of volume, with highlights including a €2bn Rabobank issue in January that attracted a €6bn book.

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