The sterling bond market grew in stature in 2021 as it proved itself able to provide opportunities across the asset classes in greater size than before. What was required was a bank to step up and take on greater responsibility to help drive the market towards an even more influential future. HSBC is IFR’s Sterling Bond House of the Year.
While the sterling bond market has sometimes been viewed as a mere arbitrage opportunity to those outside the UK, it undoubtedly plays an important role by providing borrowers with an additional string to their bows. And as funding conditions change with the rowing back of central bank schemes and the prospect of rising interest rates, this will only become more important as the need to investigate all opportunities intensifies.
“It was about careful stewardship, careful consideration and leadership,” said Dominic Kerr, HSBC's European head of corporate debt capital markets. “This was important in a market where Covid-19 and the Brexit legacy were still very uncertain.”
While such levels of uncertainty did not lead to a bumper year in terms of volume – international sterling supply was around 11% higher than 2020, according to Refinitiv data – the spread across the various asset classes required expertise that encompassed all of them.
“We are not cornered in one asset class,” said Hugo Moore, head of frequent borrowers and covered bonds. And that all-round offering saw HSBC ease itself into pole position in the 2021 league table from third place the previous year, adding a percentage point to its slice of the pie in the process.
As a bank with what deputy global head of investment banking Alexi Chan termed “a unique global footprint”, HSBC occupies a prominent position in being able to read the mood in terms of market trends, and it was this that saw it mobilise its already established ESG prowess in a sterling market that was playing catch-up to its euro counterpart.
Probably the most talked about new issue in the currency during the entire year and one of the most noteworthy in the ESG arena was the UK Debt Management Office’s inaugural green Gilt. HSBC was appointed joint structuring adviser and lead manager on the £10bn 12-year deal, an offering that broke all sorts of records from the strength of demand to the pricing benefit of the green label, underlining the bank’s position as a central player in both the sterling and ESG sectors.
The deal is IFR's Sterling Bond of the Year, although despite the fanfare, the UK’s offering was not in fact quite the "first" it appeared to be. Three weeks before, the Isle of Man beat it to the punch with a £400m 30-year sustainable bond – technically the first ESG-labelled transaction for a sovereign entity in the currency. HSBC was a common denominator between the two, however, serving as sole ESG structuring agent and joint bookrunner on the self-governing crown dependency’s bond.
Such transactions require months if not years of background work to come to fruition and are not "quick wins" – something that typifies HSBC’s approach when it comes to dealing with clients. “We are more advice-led than balance sheet-led,” said Chan.
The results of this broader, deeper world view were nowhere better exemplified than in the case of Nestle, said Kerr. As recently as 2018, HSBC had only ever played a co-manager role on the company's bond deals. By 2021, it had moved to the core; not only acting as an active bookrunner on its £1bn record two-part deal but also on its multi-tranche euro and US dollar offerings – the only bank to do so.
While a run-through of HSBC’s deal roster would do little but display just how busy it was throughout the year – it contains more than 100 deals, after all – a glance at a select few transactions serves to underline that it was at the centre of the market and its trends.
From social bonds for Motability Operations, through sustainable bonds for University College London and Assura Financing, to green bonds for Berkeley Group, HSBC cemented its credentials in the corporate ESG arena, also helping Tesco bring its first SLB in the currency.
It extended this into the financials and capital sectors with the likes of Just Group’s sustainable RT1 (and tender), while combining this with currency diversification on CaixaBank’s sterling debut in the shape of a senior non-preferred green bond. Compatriot Santander followed this with its first Basel III-compliant sterling T2.
Bank of Montreal encapsulated a number of the year’s themes – Canadian supply, a strong showing in covered bonds, size availability, spread tightness and post-Libor issuance, to name but a few – with its £1.5bn covered, with HSBC unsurprisingly at the helm.
“The sterling market was open more consistently than historically has been the case,” said Asif Sherani, head of DCM syndicate EMEA, of 2021. And HSBC was consistently at the forefront of the resultant issuance.
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