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AFME Prudential Data Report Q2 2021
8 Sep 2021
This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 30 June 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 August 2021. Among the main findings of this report: CET1 and T1 capital ratios slightly decline in Q2 2021: European GSIBs end-point CET1 ratio slightly decreased from 14.44% in 1Q21 to 14.36% in 2Q21. The decline in CET1 and T1 ratios was driven by a quarterly increase in RWAs of a larger magnitude than that of CET1 capital and T1 capital. Banks reported an increase in credit risks RWAs on the back of a surge in client demand, M&A and asset consolidation, and regulatory impact from the finalization of the euro area Targeted Review of Internal Models (TRIM). CoCo borrowing costs continue at record low: Average coupon rates of newly originated CoCos continued at 4.3% in 3Q’21, virtually the same level observed in 2Q 2021. The level, however, is significantly below that observed in 2Q 2020 (5.9%) and 2020FY (5.1%). CoCo option-adjusted spreads (OAS) have also stabilised over the last four months at c300bps, which, however, accumulates a decrease of more than 500bps from the record high levels observed at the end of Q1 2020. Stress tests results and resumption of dividend distribution in the EU, UK and the US: The Box on pages 21-26 discusses the latest stress test results undertaken by EU, UK and US banking supervisors. Although the stress scenarios vary by jurisdiction and therefore the results may not be directly comparable, the results confirm the resilience of the global banking system even in the current fragile macroeconomic circumstances as the global economy recovers from the economic effects of the pandemic. The stress tests results also support the policy decision recently taken across the three jurisdictions by lifting restrictions to banks’ dividend distributions. Banks’ resilience continues even after taking account of the impact from extremely harsh assumptions.
ESG Finance Q2 2021 - European Sustainable Finance
2 Sep 2021
AFME is pleased to circulate its European ESG Finance quarterly data report for the second quarter of 2021 (Q2 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 30 June 2021 as well as a high-level regulatory and supervisory snapshot. Key highlights: ESG bond and loan issuance marginally decelerated in Q2 2021 compared to Q1 2021. However, ESG fixed income issuance continues to display robust volumes- during Q2 2021, European ESG Bond and Loans issuance accumulated EUR 188.7 bn in proceeds, up 227% from EUR 83.1 bn in Q2 2020, with only a 3% drop from Q1 2021. ESG Bond issuance represented 17.7% of total European bond issuance during H1 2021. ESG securitisation issuance in H1 2021 reached EUR 5.2bn on four RMBS deals and one on-balance sheet ABS, a substantial increase from EUR 0.2bn issued in 2020FY. The European Commission on behalf of the EU issued EUR 14.1 bn in social bonds in May, consolidating as the largest social bond issuer in Europe. Carbon prices: The European Union Allowance (EuA) price per metric tonne stood at €53.3 in June 2021, a 110% increase from €25.3 in June 2020 and a 62.5% increase from €32.8 in December 2020. Most recently, at the end of August, EU carbon prices surpassed €60 per metric tonne. 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 Q2 2021. Contrastingly, the Regional Greenhouse Gas Initiative (USA) has an allowance price of only €7.2. ESG Funds: Global ESG Funds continued to grow during Q2 2021 across all the major asset classes, with the exception of Money Market ESG Funds. Funds with an ESG mandate (including Mutual Funds and ETFs) totaled $4.36tn as of Q2 2021, a $200bn increase from $4.16tn in Q1 2021. ESG equity funds continue to be by far the largest fund asset class, over 3x larger than fixed income funds. ESG price premia: Spreads of corporate ESG bonds against non-sustainable benchmarks have stabilized during Q2 2021. ESG premia has tightened from 9bps in April 2020 to 1bp on average during the months of April – July 2021.
AFME Securitisation Data Report Q2 2021
2 Sep 2021
AFME is pleased to circulate its Q2 2021 Securitisation Data Report. Main findings: In Q2 2021, EUR 36.4 bn of securitised product was issued in Europe, a decrease of 25.6% from Q1 2021 and a decrease of 26.0% from Q2 2020. H1 2021 (Q1+Q2) represents the lowest half-year European securitisation issuance on record. Outstanding volumes (ex-CLOs) decreased to EUR 972.4 bn at the end of Q2 2021, a decrease of 1.6% QoQ and a decrease of 2.8% YoY. Credit Quality: In Europe, upgrades comprised 84% of total rating actions by the four CRAs during Q2 2021, compared to 76% of total rating actions during Q1 2021. STS issuance: In Q2 2021, EUR 11.2 bn of total (placed and retained) securitised product was notified as Simple Transparent and Standardised (STS) by ESMA, representing 30.8% of total issued volume in Q2 2021 (EUR 36.4 bn). Out of the EUR 11.2 bn in STS issuance, EUR 8.9 bn was placed, representing 34.1% of total placed issuance in Q2 2021 (EUR 26.1 bn)
Equity capital markets continue rapid expansion in H1 2021
12 Aug 2021
AFME is pleased to circulate its Equity Primary Markets and Trading Report for the second quarter of 2021 (Q2 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: Equity underwriting on European exchanges rose 70% in H1 2021 compared to H1 2020 and 108% compared to H1 2019. IPOs rose by 7.5x year-on-year (YoY) with the largest H1 amount of proceeds since 2015. SPAC IPOs represented 15% of total European IPOs in Q2 2021 (vs. 22% of the total in the US during the same quarter). In Q2 2021, equity issuance on Jr exchanges reached a quarterly record amount of €7.7bn in proceeds. Completed Mergers and Acquisitions (M&A) of European companies totalled €523.9bn in H1 2021, a 50% increase from H1 2020 and a 20% increase from H1 2019. Announced M&A totalled €622.2bn in H1 2021, a 99% increase from H1 2020 and 56.4% increase compared to H1 2019. De-SPAC acquisitions represented 6% of the total announced M&A volume in Europe in Q2 2021 (vs 16% of the total in the US). Average daily equity trading activity on European main markets and MTFs stood at €68.2bn in H1 2021, 7% below the average daily observed in H1 2020. Double Volume Cap (DVC) update: the number of instruments banned from dark trading has recently increased to 307 at the EU or trading venue level as of July 2021 (from 205 in Dec-20).
AFME Securitisation Data Snapshot Report Q2 2021
19 Jul 2021
AFME is pleased to circulate the European Securitisation Data Snapshot for Q2 2021. Key highlights: Q2 2021 European Issuance In Q2 2021, EUR 36.4 bn of securitised product was issued in Europe, a decrease of 25.6% from Q1 2021 (EUR 48.9 bn) and a decrease of 26.0% from Q2 2020 (EUR 49.2 bn). Of this, EUR 26.1 bn was placed, representing 71.7% of the total, compared to EUR 30.0 bn placed in Q1 2021 (representing 61.3% of EUR 48.9 bn) and EUR 14.1 bn placed in Q2 2020 (representing 28.6% of EUR 49.2 bn). In Q2 2021, Pan-European CLOs led placed totals, followed by UK RMBS and German Auto ABS. Pan-European CLOs increased from EUR 6.6 bn in Q1 2021 to EUR 8.1 bn in Q2 2021. UK RMBS decreased from EUR 12.7 bn in Q1 2021 to EUR 2.9 bn in Q2 2021. German Auto ABS increased from EUR 1.5 bn in Q1 2021 to EUR 2.5 bn in Q2 2021.
AFME Government Bond Data Report Q1 2021
29 Jun 2021
AFME is pleased to circulate itsQ1 2021 Government Bond Data Report. Please note, this data report has been updated following last minute updates to the number of PDs in two countries as follows: Net increase in European Primary Dealers: There were 3 exits and 6 entries of banks between January 2021 and June 2021, affecting sovereign debt markets in 8 countries. 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: Sovereign debt issuance continues above pre-pandemic levels: Total European (EU+UK) issuance stood at EUR 923.9bn in 1Q21, an increase of 50.3% (QoQ) compared to 4Q20, and an increase of 26.6% (YoY) compared to 1Q20. EU green government bonds outstanding surpassed EUR 94.2bn in 1Q21. EUR 18.6bn of green bonds were issued in 1Q21– the highest quarterly issuance volume in records. Volumes were driven primarily by the inaugural Italian green bond (EUR 8.5 bn), a new French OAT green issue (EUR 7bn) and additional volumes added to the market via tap issuance in the Belgian and Dutch green markets. ESG bond issuance - half of European sovereign issuers set to be active in ESG markets by end-2021. As Italy joins 10 other European government issuers and the European Commission as active participants in European sovereign ESG markets, another 6 sovereigns have indicated they will bring inaugural ESG issuance to the market before the end of 2021. European government bond trading robust in Q1 2021 as volumes represent the second-highest quarterly traded volume since Q1 2017, according to MarketAxess. Credit quality: During 1Q21 there was 1 long-term credit rating upgrade for European countries and 0 downgrades, bringing the full year total to 2 upgrades and 0 downgrades (there has been 1 further upgrade in 2Q21 to date. The average bid-cover ratio (demand/amount allocated) was 2.28 in 1Q21, a decrease of 8.51% (QoQ) from 4Q21 and an increase of 5.7% from 1Q20 (YoY).
AFME Securitisation Data Report Q1 2021
15 Jun 2021
AFME is pleased to circulate its Q1 2021 Securitisation Data Report. Please note that due to ongoing revisions to the data, US non-agency issuance volumes have been revised upwards for 2019-2020. Most recent quarterly issuance data volumes (Q1 2021) concerning the US non-agency RMBS, CMBS and CDO categories likely to be revised upwards next quarter. Main findings: In Q1 2021, EUR 48.9bn of securitised product was issued in Europe, a decrease of 25.9% from Q4 2020 and an increase of 18.7% from Q1 2020. Of the EUR 48.9bn issued, EUR 30.0bn was placed, representing 61.3% of issuance, compared to the 39.4% of issuance in Q4 2020 and 58.0% of issuance in Q1 2020. Outstanding volumes (ex-CLOs) decreased slightly to EUR 987.8bn outstanding at the end of Q1 2021, a decrease of 0.5% QoQ and a decrease of 0.3% YoY. Credit Quality: In Europe, upgrades outpaced downgrades in Q1 2021, as the proportion of upgrades as a percentage of ratings actions recovered substantially to 76% of total rating actions following a fall during 2020 due to the economic effects of the pandemic. STS issuance: In Q1 2021, EUR 11.3 bn of total (placed and retained) securitised product was notified as Simple Transparent and Standardised (STS) by ESMA, representing 23.1% of total issued volume in Q1 2021 (EUR 48.9bn). Out of the EUR 11.3bn in STS issuance, EUR 6.9bn was placed, representing 23.0% of total placed issuance in Q1 2021 (EUR 30.0bn) STS issuance: Over the last three years, placed non-STS issuance has consistently made up more than double the amount of placed STS issuance in the EU+UK.
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).