Santander opts not to call CoCo bond as Intesa sells 1.25 bln AT-1 bond

Bank of Cyprus Holdings

01/09/2023 11:30

MADRID/LONDON, Sept 1 (Reuters) - Spain's Santander
 SAN.M  has decided not to call a 1 billion euro ($1.09 bln)
contingent convertible bond after the deadline for its
redemption expired, a spokesperson said on Friday, a setback for
the risky bank bond market that is recovering from a rout.    
    The decision by the Swiss regulator in March to write down
$17 billion of Credit Suisse Additional Tier One bonds (AT1s) as
part of a forced takeover by UBS  UBSG.S  roiled the AT1 bond
market, raising questions about its future.
    A Santander  SAN.MC  spokesperson told Reuters the bank was
"committed to executing calls when it makes economic sense for
all stakeholders."
    In Santander's case, rolling over the bond was cheaper than
replacing the 5.25% perpetual bond at the earliest opportunity,
which is Sept. 29. 
    This is in line with past practise from the bank and not
necessarily a reflection of the outlook for AT1s, analysts said.
    The AT1 bond market has shown signs of recovering in recent
months.
    On Thursday, Italian lender Intesa Sanpaolo  ISP.MI  sold a
1.25 billion euro AT1, an issue that attracted around 4.7
billion euros in investor orders.
    The new AT1 note, which pays a coupon of 9.125%, is the
first Italian AT1 of this year. 
    After activity slowed over the summer, this week also saw
Belgium's KBC Group NV raising a 750 million euro AT1 bond, with
a coupon of 8%.
    "Overall, these deals show that investor appetite in the
product has not been materially affected by the wipe-out of
Credit Suisse AT1 bondholders," said ABN AMRO in a note.
    ABN AMRO analysts noted ongoing confidence in the AT1 market
together with "investors being confident about the health of the
banking sector."
    In a first test since the Credit Suisse takeover, Spain's
BBVA and Bank of Cyprus became the first banks to test demand
for euro-denominated CoCo bonds back in June.
    When a bank calls it AT1 bond it is often a sign that new
issuance will follow soon. 
    ($1 = 0.9215 euros)
    

 (Reporting by Jesús Aguado in Madrid and Chiara Elisei in
London; editing by Dhara Ranasinghe and Kim Coghill)
 ((jesus.aguado@thomsonreuters.com; +34 91 835 68 32; Reuters
Messaging: Reuters Messaging:
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