BNP Paribas grabs size and duration in pre-funding raid

4 min read
Tom Revell

BNP Paribas loaded up on pre-funding for 2024 with a €1.5bn nine-year non-call eight senior preferred transaction on Tuesday, pushing out its curve and taking size while still pricing the deal with a relatively slim new issue premium. It came on a day when three very different banks tapped the senior preferred market.

Last month BNP Paribas, completed its €18.5bn-equivalent 2023 regulatory issuance plan - which encompasses subordinated and senior unsecured transactions, but excludes covered bonds and securitisations. The French lender fulfilled the last of its €10.5bn-equivalent of senior preferred needs for the year with a multi-tranche yen-denominated issuance on August 31. This was its first deal since.

While some bankers noted that September is relatively early in the year for a bank to begin loading up on pre-funding for the following year, BNP Paribas saw an opportunity after a €1.25bn holdco senior transaction from Lloyds and a €600m green senior non-preferred from Commerzbank drew multi-billion order books on Monday.

"When you see two deals like Lloyds and Commerzbank yesterday go very well, suddenly you can have a debate about pre-funding and that's what this was," said a banker, who noted that flows in the secondary market had also pointed to strong investor interest for senior paper.

Sole bookrunner BNP Paribas marketed the deal with initial price thoughts of mid-swaps plus 120bp area, before setting the spread at 95bp as demand peaked at more than €2.8bn.

Bankers' views on fair value varied depending on which points on BNP Paribas' curve they focused on, ranging from the high 80s to the low 90s, although most saw it at around 90bp - which put the concession in line with the 5bp premium paid by Lloyds on Monday.

In spite of the relatively slim concession, the book held firm, at above €2.55bn.

Bankers said the success of the deal showed that investors have plenty of appetite for euro paper from top tier national champions, many of which have focused on the US dollar market in recent weeks. Euro supply had been dominated instead by smaller and rarer lenders.

The deal - the longest euro benchmark bank senior bond since July - was also a reflection of investors' desire for duration, boosted by signals from the ECB that its rate hikes may be at an end, said bankers.

Senior preferred trades from Banca Popolare di Sondrio and Hamburg Commercial Bank on Tuesday showed the market is still receptive to smaller credits, although demand was more modest. The deals progressed almost in lockstep, with both of the €500m offerings launched 15bp inside IPTs on the back of peak demand of €750m-plus.

Italy's Banca Popolare di Sondrio was offering a five-year non-call four green senior preferred that was its first benchmark senior unsecured issuance since July 2021.

Leads Banca Popolare di Sondrio, BNP Paribas, Citigroup, Deutsche Bank, IMI-Intesa Sanpaolo, Santander and UniCredit opened books for the no-grow trade with IPTs of mid-swaps plus 225bp area, before setting the spread at 210bp. The final book stood above €670m (including €35m of leads' interest).

German lender Hamburg Commercial Bank landed its March 2027 senior preferred at 145bp over mid-swaps, down from IPTs of 160bp area, via CaixaBank, Commerzbank, Deutsche Bank, Goldman Sachs Bank Europe SE, Jefferies and UBS. The final book stood above €600m.

The deal is HCOB's second benchmark senior preferred issuance of the year, following a €750m two-year transaction priced in March.