Euro Bond House and Europe Financial Bond House: BNP Paribas

The strong foundations provided by a cohesive team are key to creating a winning formula. BNP Paribas has championed this view for a number of years and has reaped the rewards of fielding an experienced line-up well able to execute business in any environment.

With rates on the rise, quantitative easing drawing to a close and political squabbles creating headwinds, the backdrop in 2018 became increasingly demanding. But this was not something that disadvantaged the French bank.

“Previously, it was difficult to differentiate yourself because things were easy,” said Fred Zorzi, global head of primary markets. “But this is the kind of market where we can make a difference.”

This sentiment was echoed by Rupert Lewis, head of European bond syndicate.

“You have to change your game plan to suit the environment,” he said. ”We can do that better than most because we have experienced people, and that consistency of personnel is mirrored in our market presence. In a way, we’re contrarian when you compare it with the juniorisation that has gone on at some other banks.”

While BNPP has historically played a leading role in the corporate sector, ­this relative stability has afforded it the opportunity to continue to grow in other areas such as financials.

It particularly shone in the bail-in-able senior market, which arguably became the year’s most important asset class as banks strove to build up their stack of loss-absorbing debt.

Nationwide’s complex four-part exercise combining liability management and multi-currency issuance with a “flipper” feature was one example, and BNPP followed up with new entrants Nordea, Danske Bank, Sydbank, AIB and Rabobank.

BNPP was also mandated by repeat borrowers, helping La Banque Postale, for example, drag in the trading level of an outstanding seven-year SNP by recommending a 10-year on the basis that tenor trades technically tight. And it pioneered new markets, helping Commerzbank to sell the first German preferred benchmark that offered a crucial reference point for others.

But the challenge did not end at merely winning the mandates. Issuance conditions soured significantly over 2018, making a bank’s ability to spot opportune windows imperative.

BNPP repeatedly demonstrated its skill in that regard. It executed prescient deals for UBI, Banco BPM, Intesa and Banca IFIS before Italian politics became a major source of volatility, and helped BBVA seize on a short rally following Turkey’s economic crisis to raise euro Additional Tier 1 capital.

“We were following flows closely, we were close to accounts and told [BBVA] to be nimble,” said Damian Saunders, FIG syndicate manager. “It would not have been done at that level even one day later.”

FLEXING MUSCLES

BBVA was just one of BNPP’s wins in the highly competitive AT1 sector, where it led 29% of the 17 eligible transactions (excluding self-led).

While overall Tier 2 supply dwindled, it nonetheless achieved some notable outcomes including a DNB 10-year non-call five at swaps plus 77bp – the tightest euro benchmark Tier 2 since 2008.

BNPP also helped ING take out size in Tier 2 when the Yankee market was unavailable, making use of its strong Asian franchise to market a Reg S US dollar tranche alongside a euro – a strategy borrowed from the corporate market to maximise price tension and underlining the bank’s integrated approach.

“If a tactic works for corporates, we apply it for FIG clients too,” said Zorzi.

Insurance remained a strength, but trades such as SCOR’s Restricted Tier 1 – on which BNPP was joint-structuring adviser – demonstrated brains as well as brawn. The note issue was the first RT1 from France, the first in US dollars and the first with a temporary writedown structure.

It also placed an unusually large €2bn 31NC11 for AXA while containing the repricing of its curve, and helped Munich Re return to the market after six years with a landmark €1.25bn Tier 2 against a choppy backdrop.

BNPP also proved adept at placing sub-benchmark, off-the-run trades for borrowers Vivat and Abanca, pinpointing the right investors and navigating a wide range of feedback to deliver deals safely.

The trades for BBVA and Abanca are testament to BNPP’s growing market share in southern jurisdictions while maintaining its dominance in Northern and core Europe.

It led three Spanish AT1s, including the country’s tightest in the case of Santander’s €1.5bn 4.75% perpetual non-call 2025. It also priced a strategic €500m Tier 2 for Portugal’s CGD, wrapping up its recapitalisation plan.

Those mandates were testament to “years of coverage, best advice, building trust, financial structuring and a good read on market moves”, said Edward Stevenson, head of FIG DCM.

But BNPP’s client roster was by no means limited to Europe. It led six of the nine Japanese trades eligible for the Financial Bond House award, including the first covered bond from SMBC. It was also bookrunner on more than a third of the 29 relevant Canadian transactions.

Green bonds for Westpac and NAB highlighted its client coverage Down Under, as well as its sustainable credentials.

It also snagged some sterling business, including a debut covered bond for Skipton Building Society and a L&G Tier 2 that reopened the subordinated financial market after six weeks.

Additionally, BNPP’s structured finance profile in euros really took off in 2018, boasting a product list included prime RMBS and non-standard RMBS, auto ABS, credit cards and consumer loans, and a substantial list of CLOs.

BOSSING CORPORATES

Tellingly, the progress made by the bank did not come at the expense of its traditionally strong corporate franchise, although it proved a tricky year to navigate in the corporate market. As Mark Lynagh, head of the bank’s corporate debt platform for EMEA said: “We had to dig deep this year; clients became more discerning in the difficult markets.”

It still managed to secure a role on the bulk of the year’s milestone transactions, however, even as the awards period drew to a close, as multi-tranche jumbo deals for Volkswagen and Takeda demonstrated – the former also straddling currencies.

The bank had already showcased its credentials in this department at the start of the year with AB InBev’s €4.25bn transaction, pushing the boundaries further a couple of months later with Sanofi’s €8bn. In between, it acted for Novartis and Unilever.

One of the more delicate propositions was positioning Italian credits, especially following the general election. Five of the six to brave the market entrusted BNPP with their mandates.

And similar discipline was required to place a number of sub-benchmark issues, where depth of credit knowledge and experience again played a key role. “Consistency and complacency are very different things,” said Lynagh.

“Our level of commitment remains the same, whether the deals are big or small or rated or unrated, and whether the issuer is a new one or an old one,” said Zorzi.

This diversity also held true in the hybrid market, where the bank was at the forefront of a sector growing on the back of S&P methodology changes and the liability management exercises that went with them – an example being Telefonica’s foray – not to mention new entrants such as Danone and Unibail-Rodamco.

And in this sector, BNPP was at the forefront of SRI issuance for the likes of Orsted and Iberdrola.

“You can’t be a good Green bond house without being a good general house,” said Zorzi, “It’s complementary.”

And this generality arced back into the SSA world, where the bank was instrumental in inaugural Green bonds from Belgium and Ireland, a follow-on from Poland and, closer to home, transactions from AFD and SGP.

As a primary dealer in the majority of eurozone countries, BNPP was appointed duration manager on the 15-year inflation-linked deal for Spain and France’s 20-year, while CPPIB’s €1bn transaction offered some transatlantic variety.

A myriad of mandates from the great and good of agencies and supranationals from Europe and the rest of the world duly followed, testament to the bank’s long-standing association with such issuers.

“There has to be trust, and relationships are built up over a long time,” said Zorzi. “We have an integrated team that offers what we believe is the best advice to clients.”