Rocketing up the tables
The end of low interest rates and growing geopolitical headwinds made it tricky for issuers to access the corporate bond market in Europe. Despite the difficult times, HSBC picked up market share across euros and sterling and is IFR's Europe Investment-Grade Corporate Bond House of the Year.
A stop-start 2022 meant bankers selling corporate bonds had to differentiate themselves on execution and HSBC did just that. Its league table ranking went from eighth to third in the euro market, according to Refinitiv data. In the sterling market, the bank edged up to number two from three.
HSBC's climb up the league tables came even as overall supply across the two currencies dropped by around 20% from 2021. In euros, the bank increased its market share to 5.9%, according to Refinitiv, from 4.2% in 2021. In sterling, its market share went to almost 12% from less than 9%.
"The league table does tell a unique story and the degree of market share we’ve been able to capture," said James Cunniffe, the bank's head of corporate and structured debt syndicate. “We’ve got a mantra: how can we be the most client-focused business on the Street?”
A key part of the bank’s success was in being able to read the runes early. “The risks of central bank policy were understood in 2021. The real skill was to get ahead of them and to adapt strategies,” said Cunniffe.
HSBC did so for its clients in various ways. Take Enel, the biggest European issuer from the energy sector in 2022. HSBC ran transactions for the corporate across US dollars, sterling and euros in 2022, all in sustainability-linked format, including a €2.75bn triple-tranche offering in January and a £750m seven-year deal in April. Those deals ensured Enel was able to get liquidity in early and lock in relatively attractive pricing.
“Funding went from being commoditised to strategic,” said Flavio Fabbrizi, co-head of European corporate debt capital markets, referring to how issuers tackled the primary market in 2022. “Advice was key.”
Enel was just one out of a number of clients that awarded HSBC repeat mandates. Others included Nestle and Unilever. One of Nestle's trades, a €1.5bn triple-tranche offering in November, included a €500m March 2028 note that came flat to mid-swaps, a pricing level that was far from obvious. “That took an element of conviction,” said Ingo Nolden, the bank's other co-head of European corporate DCM.
Another example where being bold paid off was a €3bn four-part green bond for TenneT in October. The deal injected some confidence into a market that was struggling to entice big orders from investors.
The Dutch state-owned transmission system operator targeted six, 9.5, 12 and 20-year tranches. The deal was oversubscribed, with total combined demand of about €6bn. Orders were skewed towards the two longer notes. That was quite an outcome given how supply of tenors of 12 years or longer had fallen in 2022 by over 60% at the time of the deal. The 20-year tenor in particular had fallen out of favour given rates volatility, but TenneT's deal showed investors were back all of a sudden seeking yield.
“The main objective was the size. We felt the 20-year was additive to the process of delivering a €3bn size. It was the correct decision, but it wasn’t easy to make,” said Nolden.
Helping debut issuers was something else the bank excelled in. A standout was Visa’s inaugural euro offering, a €3bn triple-tranche deal in May. It comprised four, seven and 12-year notes, with the two longer ones landing inside the corporate’s US dollar curve.
The transaction highlighted HSBC's ability to bring blue-chip US issuers to the euro market even as reverse Yankees lost their shine in 2022 as borrowers preferred the depth and stability of their domestic market.
Still, the bank was on the most notable reverse Yankee of the year: Medtronic's €3.5bn four-part deal in September, which showed HSBC's nose for opportunistic timing. The US medical devices company managed to print the bonds with a smaller concession than the average at the time.
"We took advantage of high investor cash balances to secure peak books of more than €14.7bn," said Cunniffe.
With minimal concessions, the deal secured maximum size at a competitive cost versus US dollars, with the nine-year portion pricing around 5bp inside the company's US dollar curve.
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