There are 202 billion At1 bonds in European banks
At least 202 billion euros outstanding, with 23 billion to be refinanced within the year. They are At1 securities issued by European banks. The same ones that have been reset for Swiss credit under the agreement with Ubs. These are hybrid capital instruments, which guarantee extremely high returns to investors and are included in the primary capital as “additional” (Additional Tier1, At1). A decision, that of their zeroing, which could have repercussions on the entire sector. At the very least, warn Jp Morganfor the cost of financing for banking institutions.
Higher yields
The central banks have immediately reassured the observance of the creditor hierarchynot respected in the case of Credit Suisse with thereset of At1s before equity. A faculty provided by the regulation of Credit Suisse issues in the event of public intervention. But after the Credit Suisse precedent investors will demand a higher yield to buy this type of instruments, increasing for the banks the cost of supply.
The numbers of Intesa and Unicredit
The bank with the largest amount of At1 outstanding is Hsbc with 18 billion. Followed by Barclays (15 billion) Bnp Paribas (12 billion) e SocGen (10 billion). Among the Italians, they stand out Unicredit with 6.8 billion e Intesa Sanpaolo with 6.3 billion. At a great distance bpm bank with just over one billion euros.
Deutsche Bank primacy
As a proportion of risk-weighted assets (Rwa), the bank with the highest At1 ratio is Julius Baer (7.2%) followed by Barclays (3,9%), SocGen (2,8%), Hsbc e Deutsche Bank (2.4%). Based on a number of assumptions, Jp Morgan it also estimates higher funding costs for European banks. The primacy would go to Deutsche Bank, with an increase of 400 million euros between 2023 and 2025. Followed by Barclays and SocGen with 300 million each.
The estimated impact for the Italians
For the Italians, the estimated impact is 100 million just for Understanding that for Unicredit. While the estimate is of a substantially zero impact for bpm bank.
The most visible effect on the banking system was seen in the index iTraxx sub financialcalculated on the basis of a basket of 30 issues of subordinated debt of financial institutions. Between Friday’s close and Monday’s open, it rose to 268 basis points from 228. The same index, a month ago was traveling around 150 basis points.