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AFME Prudential Data Report - 2021 Q1
11 Jun 2021
This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 31 March 2021. It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as at May 2021. Among the main findings of this report: CET1 capital ratio reaches a new record high: European systemically important banks (GSIBs) continued to comply with the minimum required solvency and liquidity ratios to support businesses navigate the economic recovery. European Contingent Convertibles’ (CoCo) borrowing costs reach record low: In the first months of Q2 2021, borrowing costs for Additional Tier 1 (AT1) fixed coupon instruments reached a record low reflected with an average coupon of 4.2% for newly originated CoCos. Exception circumstance for Leverage Ratio exposure measure: The Box on pages 21-24 discusses the importance of extending the period of exceptional circumstances for the temporary exclusion of certain central bank exposures from the leverage ratio (LR). Given the continued economic strain, quantitative easing measures and extraordinary levels of Member States and EU bond issuance, it would be premature for the ECB Banking Supervision to exit the ‘exceptional circumstances’ in June 2021.
AFME European High Yield and Leveraged Loan Report Q1 2021
26 May 2021
The Report contains European leveraged finance market trends for the first quarter of 2021, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €107.7 billion in proceeds in 1Q’21, a 73.8% increase from €62.0 billion in 4Q’20 and a 14.1% increase from €94.4 billion in 1Q’20. This quarterly growth was driven predominantly by an increase in leveraged loan issuance. Primary high yield bond issuance totalled €41.6 billion on 93 deals in 1Q’21, a 24.4% increase from €33.4 billion on 83 deals in 4Q’20 and a 42.5% increase from €29.2 billion on 71 deals in 1Q’20. The proportion of USD-denominated issuance decreased to 17.1% of all issuance in 1Q’21, from 21.0% in 4Q’20 and from 24.2% in 1Q’20. The leading use of proceeds for high yield bonds issuance in 1Q’21 was general corporate purposes with €32.3 billion, which was up 26.8% from €25.5 billion in 4Q’20 and up 145.5% from €13.2 billion in 1Q’20. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totalled €66.1 billion on 143 deals in 1Q’21, up 131.6% from €28.5 billion on 100 deals in 4Q’20 and up 1.4% from €65.2 billion on 83 deals in 1Q’20. Refinancing/Repayment of Debt was the largest use of proceeds in 1Q’21 with €44.4 billion, followed by LBO/MBO of debt with €13.3 billion and acquisitions with €6.5 billion. According to Reorg, the vast majority of 1Q’21 European leverage loan deals (97%) were covenant-lite. The remaining 3% of 1Q’21 deals were covenant-loose, containing a leverage maintenance. According to Covenant Review, 36% of all leveraged loan deals reviewed in 1Q’21 contained an ESG feature, compared to just 4.9% of all deals reviewed in 2020FY. Credit quality: S&P reported the trailing 12-month speculative-grade bond default rate at 5.9% in March 2021, an increase from 5.3% in December 2020. Moody’s reported the trailing 12-month speculative-grade default rate at 4.7% in March 2021, down from 4.9% in December 2020. Fitch reported an increase in European Leveraged Loan default rates at 5.1% in March 2021 (including c* and cc* rated issuers as if those had already defaulted), an increase of 0.2% since December 2020. 6 bond-related defaults were reported in 1Q’21 by S&P and Moody’s, all in developed market Europe. Distressed exchange was the most frequent reason for default. According to Moody’s, in 1Q’21 upgrades exceeded downgrades in Europe (35 upgrades to 13 downgrades). This is an improvement on 30 downgrades to 10 upgrades in 4Q’20 and 78 downgrades to 4 upgrades in 1Q’20. S&P also reported an improvement in the downgrades-upgrades ratio. According to S&P, in 1Q’21 downgrades exceeded upgrades in Europe (24 downgrades to 22 upgrades), a better ratio than 43 downgrades to 14 upgrades in 4Q’20 and 78 downgrades to 4 upgrades in 1Q’20.
AFME Equity Primary Markets and Trading Report Q1 2021
19 May 2021
AFME is pleased to circulate its Equity Primary Markets and Trading Report for the first quarter of 2021 (Q1 2021). The report provides an update on the performance of the equity market in Europe in activities such as primary issuance, Mergers and Acquisitions (M&A), trading, and equity valuations Key highlights: Large increase in equity capital raising: Equity underwriting on European exchanges rose 153% YoY, consolidating a robust recovery after the COVID-19 outbreak. IPOs rose by 18x year-on-year (YoY) with the largest quarterly amount of proceeds since Q4 2015. Completed Mergers and Acquisitions (M&A) of European companies totalled €275.2bn in Q1 2021a 43% increase from the amount completed in Q1 2020 (€192.7bn). The amount of announced M&A totalled €311.4bn in Q1 2021 a 51% increase from €205.8bn in Q1 2020. Special Feature: European SPACs in numbers. Pages 11-14 present some illustrative statistics about the recent growth of Special Purpose Acquisition Companies (SPAC) IPOs on European exchanges and announced M&A transactions by SPACs in Europe (i.e. De-SPACs). SPAC IPOs have represented 8.8% of total European IPOs in 2021YtD (vs. 61.8% of the total in the US). De-SPAC acquisitions have represented 10% of the total announced M&A volume in Europe (vs 22% of the total in the US). Of these announced acquisitions, 89% are De-SPACs of US-headquartered SPACs, representing a total of EUR 33.3bn in deal value. Average daily equity trading activity on European main markets and MTFs stood at €71.6bn in Q1 2021, 16% below the average daily value observed in Q1 2020 (€85.7bn). Bid-ask spreads for selected European equity indices continued to decline during Q1 2021, reaching most recently pre-pandemic levels. Double Volume Cap (DVC) update: The number of instruments banned from dark trading has recently increased to 250 at the EU or trading venue level as of May 2021 (from 205 in Dec-20).
AFME European ESG Finance Quarterly Data Report: Q1 2021
10 May 2021
AFME is pleased to circulate its European ESG Finance quarterly data report for the first quarter of 2021 (Q1 2021). The aim of this quarterly report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe. This Report contains up to date trends for the European Sustainable Finance market as at 31 March 2021 as well as a high-level regulatory and supervisory snapshot. Key highlights: ESG bond and loan issuance continues to rapidly grow in Q1 2021. During Q1 2021, European ESG Bond and Loan issuance accumulated EUR 184.0 bn in proceeds, up 228% from EUR 56.1 bn in Q1 2020 and up 19.8% from EUR 153.6 bn in Q4 2020. ESG bond issuance represented 17.2% of total European bond issuance during Q1 2021, up from 8.9% in 2020FY. 63.5% of ESG bonds were issued in the Sovereign, Supranational and Agency sector, 18% by Financial Institutions, 18% by non-financial corporates and 0.4% in ABS/RMBS. The EU Commission (on behalf of the EU) has continued to lead the ESG market with EUR 36bn in social bonds issued during Q1 2021. ESG securitisation issuance reached EUR 1.1bn in Q1 2021, surpassing the total amount issued during 2020FY (EUR 0.8bn). European carbon prices reach record high. The European Union Allowance (EuA) price per metric tonne stood at €42.4 in March 2021 a 150% increase from €16.8 in March 2020. Most recently, EU carbon prices temporarily surpassed €50 per metric tonne as of early May 2021. There is significant dispersion in the price of pollution globally. The EU Emissions Trading System (ETS) had the highest allowance price globally, followed by the Switzerland ETS at €39.25, and the New Zealand ETS at €22.1 as of end Q1 2021. Contrastingly, the Regional Greenhouse Gas Initiative (USA) has an allowance price of only €7.0. Global ESG Funds continued to grow exponentially during Q1 2021. Funds with an ESG mandate (including Mutual Funds and ETFs) totalled $4.3tn as of Q1 2021, a $1.7tn increase from $2.6tn in Q1 2020. ESG equity funds continue to be by far the largest fund asset class, over 3x larger than fixed income funds. Spreads of Green and ESG bonds against non-sustainable benchmarks (“Greenium”) have continued to tighten during 2021. ESG premia has tightened from 9bps in April 2020 to 1bp on average in April 2021. According to AFME estimates, green premia has significantly tightened for corporate green instruments closer to virtually zero bps in April 2021. There are various factors that may explain the decline in ESG and green premia, including the substantial increase in supply of new ESG and green instruments.
AFME Securitisation Data Snapshot: Q1 2021
21 Apr 2021
AFME is pleased to circulate the European Securitisation Data Snapshot for Q1 2021 Key highlights: Q1 2021 European Issuance In Q1 2021, EUR 48.6 bn of securitised product was issued in Europe , a decrease of 26.3% from Q4 2020 (EUR 66.0 bn) and an increase of 18.0% from Q1 2020 (EUR 41.2 bn) Of this, EUR 30.0 bn was placed, representing 62.0% of the total, compared to EUR 26.0 bn placed in Q4 2020 (representing 39.4% of EUR 66.0 bn) and EUR 23.9 bn placed in Q1 2020 (representing 58.0% of EUR 41.2 bn) In Q1 2021, UK RMBS led placed totals, followed by Pan-European CLOs and Dutch RMBS. UK RMBS increased from EUR 0.3 bn in Q4 2020 to EUR 12.7 bn in Q1 2021 Pan-European CLOs decreased from EUR 7.0 bn in Q4 2020 to EUR 6.6 bn in Q1 2021 Dutch RMBS increased from EUR 0.7 bn in Q4 2020 to EUR 2.3 bn in Q1 2021
AFME Prudential Data Report 4Q2020
22 Mar 2021
This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 31 December 2020. It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe for the full year 2020 and updated as at March 2021. Among the main findings of this report: European systemically important banks (GSIBs) reported in 4Q20 new record CET1, T1 capital, TLAC, Leverage and Liquidity Coverage ratios allowing them to continue to support the economic recovery. External capital raising in 2020 above 2019 amount: The amount of new capital raised during 2020FY by European banks totalled EUR 34.4 bn, slightly above the level observed in 2019 (EUR 34.3bn). The amount of fresh capital raised was predominantly in the form of contingent convertible (CoCo) bonds. Most recently, in 2021 YtD (as of mid-March) European banks have accumulated a total of EUR 5.2bn in new fresh capital, of which EUR 4.8bn was in the form of CoCos. Banks continued to extended their debt maturity profile. The proportion of long-term debt (>10Y) has continued to increase in both relative and absolute terms over the last year, increasing from €360bn (17%) in 1Q20 to €387bn (18%) in 1Q21. The proportion of short-term debt (<1Y maturity) has decreased from 20% in 1Q20 of total market debt to 16% in 1Q21. Contribution of the Banking sector and European capital markets in financing the recovery: The Box on pages 21-28 provides a summary with the contribution of the Banking sector and European capital markets in financing the recovery - one year after the COVID-19 outbreak. Banks interacting in the European market have continued to support the economic recovery, with unprecedented volumes of loans to corporates and SMEs, record volumes of trading and primary markets origination, and orderly post-trade activities. Corporate borrowers raised a record amount of debt from markets during 2020, with a total of EUR 495bn in investment grade bond issuance. European governments issued a record of EUR 3.7 tn in bonds and bills from markets, as European sovereigns contend with the funding demands. European ESG bond issuance totalled a record of EUR 252.6 bn in 2020, from EUR 133.9 bn in 2019.
AFME Government Bond Data Report Q4 2020
17 Mar 2021
AFME is pleased to circulate itsQ4 2020 Government Bond Data Report. This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU27+UK). Report highlights include: During Q4 2020, quarterly traded volume remained at EUR 65.2 bn, equal to the volume observed in Q3 2020. Overall, during 2020 full-year, average trading volumes were the highest since 2015 according to MarketAxess. The average bid-cover ratio (demand/amount allocated) was 2.50 in 4Q20, an increase of 12.3% (QoQ) from 3Q20 and an increase of 18.0% from 4Q19 (YoY). During 4Q20 there were 4 long-term credit rating upgrades for European countries and 1 downgrade, bringing the 2020 full year total to 8 upgrades and 4 downgrades. There were 9 exits and 3 entries of banks to the European Primary Dealer system between August 2020 and January 2021, affecting sovereign debt markets in 7 countries. There are now 15 European sovereign issuers, representing two-thirds of European countries which have an active PD system, at the lowest or below the lowest number of Primary Dealers on record. The unprecedented funding demands during 2020 have meant that a record EUR 3,675 bn of bonds and bills were issued throughout 2020 full year, the largest issuance volume of any year on record. Most recently, however, there has been a partial normalisation in issuance volumes of European (EU+UK) bonds and bills issuance with EUR 614.5bn issued throughout 4Q20, which represents a decrease of 37.3% (QoQ) compared to 3Q20, and an increase of 31.0% (YoY) compared to 4Q19. Outstanding amount of EU green government bonds surpassed EUR 75bn during 4Q20 in which EUR 14.5bn of green bonds were issued – the highest quarterly issuance volume of green government bonds in Europe to date. Volumes were driven primarily by the inaugural issuance of the green German bund (EUR 5.0bn), and tap issuance in the French, Belgian and Hungarian green bonds, which raised outstanding volumes of European green government bonds to EUR 75.7bn. There is some degree of evidence of small green premia relating to green bond issues within Belgium, France and Ireland. Green bond yields in jurisdictions and time periods considered in the report have been consistently below that of the conventional yield curve. Auctions of green securities in H2 2020 in Belgium saw enhanced levels of demand, as measured by high relative bid-cover ratios, suggesting investor appetite of green sovereign bonds in Belgium may have increased during the Covid-19 pandemic.
AFME European High Yield and Leveraged Loan Report: Q4 2020
15 Mar 2021
The Report contains European leveraged finance market trends for the fourth quarter of 2020, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €61.9 billion in proceeds in 4Q’20, a 13.3% increase from €54.2 billion in 3Q’20 and a 28.2% decrease from €82.2 billion in 4Q’19. This quarterly increase was driven mainly by an increase in high yield bond issuance. Primary high yield bond issuance totalled €33.4 billion on 83 deals in 4Q’20, a 32.5% increase from €25.2 billion on 62 deals in 3Q’20 and a 1.47% decrease from €33.9 billion on 67 deals in 4Q’19. The proportion of USD-denominated issuance increased to 21% of all issuance in 4Q’20, up from 13.3% in 3Q’20 and from 26.0% in 4Q’19. The leading use of proceeds for high yield bonds issuance in 4Q’20 was general corporate purposes with €25.5 billion, which was up 105.6% from €12.4 billion in 3Q’20 and up 44.0% from €17.7 billion in 4Q’19. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totalled €28.5 billion on 100 deals in 4Q’20, down 1.7% from €29.0 billion on 44 deals in 3Q’20 and down 40.1% from €48.3 billion on 74 deals in 4Q’19. LBO/MBO was the largest use of proceeds in 4Q’20 with €10.9 billion, followed by refinancing/repayment of debt with €7.2 billion and acquisitions with €2.7 billion. Pricing spreads for institutional loans widened by 15.9 basis points (bps) q-o-q and by 41.59 bps y-o-y. Spreads for pro rata loans widened by 54.73 bps q-o-q and tightened by 41.7 bps y-o-y. Credit quality: As of December 2020, S&P reported the trailing 12-month speculative-grade default rate at 5.3%, an increase from 4.3% in September 2020 and from 2.2% in December 2019. Moody’s reported the trailing 12-month speculative-grade default rate at 4.7% in December 2020, up from 3.9% in September 2020 and from 1.7% in December 2019. Fitch reported an increase in loan default rates to 4.3% in December 2020 (including c* and cc* rated issuers as if those had already defaulted) from 2.45% in December 2019. According to Reorg, the vast majority of 2020 European leverage loan deals (86%) were covenant-lite. The remaining 14% of 2020 deals were covenant-loose, containing either a leverage maintenance and/or a minimum liquidity covenant. 18 bond-related defaults were reported in the fourth quarter of 2020 by Standard and Poor’s and Moody’s, all in developed market Europe. Distressed exchange was the most frequent reason for default. More than 75% of S&P and Moody’s European corporate ratings actions in 4Q’20 were downgrades, reflecting the ongoing credit concerns on the corporate sector.
AFME European ESG Finance Quarterly Data Report: Q4 2020
4 Mar 2021
AFME is delighted to launch the new European ESG Finance quarterly data report. The aim of this quarterly report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe. This Report contains up to date trends for the European Sustainable Finance market including issuance of green, social and sustainable bonds and ESG and Green linked loans; green Securitisation issuance; outstanding amounts of ESG bonds; ESG fund management; ESG bond trading; and ESG valuation figures as well as a high-level regulatory and supervisory snapshot on the European Sustainable Finance market. Key highlights from 2020: European ESG bond and loan Issuance experienced substantial growth in 2020, with issuance increasing 58.8% from EUR 245.0bn in 2019 to EUR 389.0bn in 2020, continuing the upward trend seen since 2015. ESG Bond issuance equaled 8.3% of total European bond issuance in 2020, up 3% from 5.0% in 2019. A large inaugural social bond of EUR 17 bn was issued by the European Commission in Q4’20. This was followed by two further social bond issues in Q4’20 of EUR 8.5 bn and EUR 14 bn. ESG & Green Linked Loan issuance equaled 13.7% of total European syndicated loan issuance, up 3.2% from 10.5% in 2019. In 2020, theEuropean Union Emissions Trading System(EU ETS) was the largest greenhouse gas emissions trading scheme globally, with 2249.1 Mt CO2-eq covered, with a value of USD 33.6 bn. The European Union Allowance (EuA) price per metric tonne has increased by 21.3% from €24.03 in December 2019 to €30.52 in December 2020. Global funds with ESG mandate accumulated USD 22,731 bn in Q4 2020 in total assets, comprising of USD 13,953 bn in equity funds, USD 5,575 bn in bond funds and USD 3,203 bn in other asset classes. Option Adjusted Spreads (OAS) of Euro-denominated Corporate ESG bonds reached peak levels in March 2020 at 238bps and have since normalised, ending 2020 at 91 bps. Equity prices of sustainable companies ended 2020 with losses of less than 1% according to the MSCI Europe SRI Net Index. This compares with losses of 6.2% in the EUR STOXX 600 equity composite index. According to Trax, the Average Daily Trading Volume (ADV) of European ESG bonds in 2020 was EUR 0.80 bn. November of 2020 saw the highest ADV of the year at EUR 1.1 bn, followed by March with an ADV of EUR 0.85 bn. The average European ESG Bond Turnover Ratio in 2020 was 0.19%, down from 0.21% in 2019. This compares with turnover ratios of 2%-1% of benchmark European sovereign bonds. This report includes a regulatory and supervisory snapshot on the European Sustainable Finance market. It covers recent initiatives and upcoming deadlines in relation to issues such as taxonomy and disclosures. We will continue to update this regulatory snapshot every quarter.
AFME Equity Primary Markets and Trading Report Q4 2020
1 Mar 2021
Key highlights: Large increase in equity capital raising: 2020 saw a large annual increase of 51% in equity underwriting on European exchanges. Follow-on offerings rose 69% year-on-year (YoY) with the largest annual amount of proceeds since 2007. IPO issuance on European exchanges, however, totalled €18 bn in 2020— the lowest annual amount since 2012. Completed Mergers and Acquisitions (M&A) of European companies totalled €671.8bn in 2020 a 27% decrease from the amount completed in 2019 (€918.5bn). The amount of announced M&A totalled €905.5bn in 2020 a 3% decrease from €929.5bn in 2019. Average daily equity trading activity on European main markets and MTFs stood at €68.5bn in 2020, 16% above the average daily value observed in 2019 (€59.1bn). Bid-ask spreads for selected European equity indices continued to decline during 2H 2020, following the market stress episode originated by the COVID-19 outbreak. However, liquidity conditions, as measured by bid-ask spreads, have not returned to pre-COVID levels. Double Volume Cap (DVC) update: The number of instruments banned from dark trading has declined in the course of the year to 205 instruments suspended at the EU or trading venue level as of Dec-20 (from above 1,200 in Aug-18). Due to concerns about the temporary disruption of the ESMA IT systems following the end of the Brexit transition period, ESMA will not perform the monthly DVC publications for the months of January and February of 2021. 2020FY variation of European Equity activityEU27 member countries, UK and Switzerland