The EUR IG credit market was -4bps tighter last week with markets welcoming the outcome of the US elections on Tuesday and despite some rates volatility both in the US and in the continent. In this context, Financials were -5bps tighter WoW outperforming Industrials at -3bps and Utilities at -1bp.
Within financials, SP bonds were -2.9bps to z-spread +78bps with Greek names amongst the best performing supported by the results from three of the major banks which were supporting the recent trends. SNPs were -3.8bps on average with core assets retracing some of the recent underperformance while AT topped the list on the solid performance from RBI post the US-elections result. T2 bonds closed the week -5.7bps with similar dynamics as in SNP, while AT1s were -8.7bps to 366bps with the SOCGEN 7 7/8 -33bps WoW continuing the strong performance post 3Q24.
Main events from last week:
- On Tuesday, Moody’s upgraded Abanca on the back of the significant improvement in profitability (customer margins up 200bp since 2022), material improvement in the bank's DTA-adjusted capitalization (+130bp in last 12 months) and stable asset quality (NPLs at c.2.6%). New ratings include the SP at Baa2 and the Tier 2 at Ba1, outlook is Stable (Fitch remains on positive).
- On Wednesday BPM announced the intention to launch a cash offer on 100% of Anima’s capital at €6.2 per share (8% premium vs. closing price and +25% vs the 6-months VWPA). Financially, the acquisition will have limited impact on BPM's capital (exp. at -30bps) as the bank is proposing to acquire Anima via its 100% owned life insurance business BPM Vita which will allow them to apply for the Danish Compromise. On the other side, the deal is expected to be EPS accretive (c.10%) and to improve the group RoTE to >17% from 13.5% currently.
- On Friday, Fitch changed the outlook on the sovereign of Spain to Positive from Stable. For banks, we expect a similar move on SANTAN given the sovereign cap, and, although not an automatic move, a positive for CABKSM, ABANCA, and UCAJLN due to the improving operating environment.
The week ahead we get from the US CPI data on Wednesday, PPI data on Thursday and Retail Sales on Friday. From Europe we get GDP data on Thursday and out of the UK we get GDP on Friday.
Results-wise, some of the last banks in our coverage will report their 3Q figures this week: Mediobanca on Tuesday and ABN AMRO on Wednesday.