CdM| The Spanish bank will redeem early an issue of preference shares convertible into ordinary shares for a total nominal amount of €1 billion, as reported Friday to the National Securities Market Commission (CNMV). In this way, the entity has informed of its “irrevocable decision” to proceed with the redemption on September 24, coinciding with the first review date. The redemption price for each preference share will be €202,937.50, equivalent…
As sentiment around banks improves, and the prospect of interest rates to rise it’s become increasingly difficult to disregard the potential of AT1 CoCos. Its history of providing portfolios with some cushion in a rising rate environment is sure to be an attractive proposition for investors.
On Tuesday Banco Santander announced that it will not exercise the repurchase of its contingent convertible bonds (CoCos) – the AT1 – of 1.5 billion euros and coupon of 6.25%. The bank, which referred to financial reasons, had already warned in its presentation of results that it would only make the call if conditions were adequate.
The European banks are having nothing but trouble in the last few months. And if they needed something else to further cloud their outlook – negative interest rates, meagre margins, increasing capital demands…- doubts have begun to emerge lately over whether the sector can continue to pay the high interest on the so-called CoCos (Contingent Convertible Capital Instruments), contingent convertible bonds.
MADRID | The Corner | Santander will issue contingent convertible bonds (CoCos) worth up to 1,500 million euros. In order to reach its aim, the bank will start a road show to sound out the market interest and, in case of suitable conditions, it will start the operation on Monday or Tuesday next week with the collaboration of Credit Suisse, HSBC, JP Morgan, Société Générale and UBS. This issue of CoCos will be the third that the Spanish bank carries out this year, after the issue of 1,5000 million euros in March at an interest rate of 6.25% and another one in May when it sold CoCos worth 1,500 million dollars at 6.375%.
MADRID | By The Corner | European banks have strenghtened their capital ratios for the upcoming stress tests and the AQR, whose results will be known after the summer. In that sense, between July 2013 and May 2014, EZ lenders increased their base capital by €45 billion, although it wasn’t entirely by issuing shares but contingent convertible bonds (CoCos), by which they would have raised around €35 billion.
Aristóbulo de Juan (Former Head of Banking Supervision. Bank of Spain) | The current obsession of bank regulators worldwide is capital, reinforcing capital. For good reasons: capital is fundamental. But, under the surface, this appears to be a nominal rather than effective fixation, at least judging by the questionable quality of some of the components of minimum capital required by regulators in Europe and elsewhere. Moreover, paradoxically, the regulatory and…
AT1 CoCos were created to help European banks raise assets to meet Basel III capital requirements following the 2008 financial crisis. According to an analysis of Wisdom Tree, “under Basel III, some of the first AT1 CoCo bonds issued are now approaching their first call date (five years from issuance) and this year we will see for the first time how issuers will behave in terms of calling the AT1 CoCo bonds or extending them. Given this will set precedent for the market, investors are closely watching.”
Miguel Navascués | The high retail interest rates in Spain, over 8% compared to at least 4% in France and other Eurozone countries, without doubt indicates usurious behavior, of the banks’ abuse of power at the expense of the customer, who on the other hand ought to inform and educate himself and refuse to pay these rates. I would say that, in fact, there is an oligopolistic factor in Spanish banking which stamps its slant on the interest rates it charges.
Greece has been let down on numerous occasions by its politicians and Tsipras has often criticised opposition parties for their role that led to the crisis in 2009 and its management subsequently. However, he must look back at those six months of 2015 and wonder what he was thinking.