A global read
For guiding issuers through an unprecedented year, with a global vision and sure-handed execution across the capital stack, HSBC is IFR’s Europe Financial Bond House.
Building on a strong finish to 2019 – in which it won the award it now retains – HSBC was fast out of the blocks in 2020.
It brought a succession of unseasonably early capital trades to market in the first weeks of the year, taking advantage of what were historically attractive levels, a move that would prove wise given the volatility ahead.
Those early successes ranged from Santander’s 4.375% €1.5bn Additional Tier 1 in the first week of the year to Phoenix’s 5.625% US$750m Reg S Restricted Tier 1 later in January.
But perhaps most eye-catching was Intesa Sanpaolo’s AT1 on February 20 – the first ever euro dual-tranche AT1.
A €750m perpetual non-call five-year tranche set the record for the lowest ever coupon for an Italian AT1 at 3.75%, while a €750m perpetual non-call 10 tranche landed at 4.125%, with combined demand exceeding €8bn.
When the Covid-19 crisis struck, this proactive approach meant many issuers were at least better positioned in terms of capital needs than they would typically be so early in the year.
Following the market turmoil triggered by the pandemic in early March, HSBC played a key role in reopening bank funding and capital markets.
The strengths of HSBC’s franchise, with an international reach, far-flung sales and trading presence, and the ability to execute across products and time-zones came to the fore.
“This was an unprecedented time of market volatility and HSBC was a go-to house,” said Hugo Moore, HSBC’s head of frequent borrowers and covered bonds.
“Why? Our global read and execution prowess. We can take a snapshot of the world and tell issuers what to do, but more importantly what not to do.”
HSBC led a run of covered bonds from Canadian and French issuers in mid-March, pushing issuers towards the secured space for cost-effective funding.
The bank slipped from the top spot of the covered bond league table in 2020, a year in which issuance volumes plummeted, but demonstrated leadership throughout with these and many other market-reopening transactions.
As credit markets began their recovery, HSBC assisted issuers’ return to the capital space, first with insurers Legal & General and PIC in late April – £500m and £300m Tier 2s, respectively – then in the bank AT1 market.
HSBC ran ABN AMRO’s blowout €1bn 4.375% AT1 that had a €10bn order book and was one of two deals to reopen the market on June 8.
Asia hand
On that deal and a 4.375% €1bn AT1 for Rabobank in July, HSBC’s global reach helped deliver a strong Asian bid after carrying out non-deal investor work when the bank capital market was shut.
Through its presence in the region, HSBC was also able to put issuers such as Just Group in touch with new Asian investors.
“In terms of how we managed to maintain a very high 40% general capital market share in the post-Covid arena, that’s been at the forefront,” said Mark Pearce, HSBC’s head of FIG syndicate.
As markets became more buoyant in the second half of the year, HSBC consolidated a dominant position in the insurance space. Building on its expertise in structuring and M&A advice, HSBC was far and away at the top of the insurance league table.
“It’s a very deep relationship we have with these insurance companies,” said Christoph Hittmair, HSBC’s global head of FIG debt capital markets. “But at the same time, you’ve got to perform.”
The bank led, for example, all of Allianz’s 2020 issuances. Most notable was the German insurer’s long-awaited €1.25bn/US$1.25bn dual-tranche Restricted Tier 1 debut, a blowout that set new records for the pricing of perpetual contingent capital securities and is IFR's Europe Financial Bond of the Year.
With demand peaking at €6.25bn and US$9.8bn, the euro tranche was launched at 2.625% and the dollar tranche at 3.5%, inside all estimates of fair value.
Living up to its reputation as a leader in sustainable finance, HSBC was also ever-present in the FIG ESG bond market, with highlights including inaugural green bank bonds from Ireland and Greece.
“ESG represented a huge opportunity for issuers this year to do right thing and bring in funding at cost-effective levels, diversify and make a splash,” said Moore.
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