RPT-Fitch: EMEA 2013 Corporate Issues Hits Record; New Low for Banks
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Jan 29 (Reuters) - (The following statement was released by the rating agency)
EMEA non-financial corporate bond issuance rose to a new high of EUR383.3bn in 2013, while financial-sector issuance hit a new post-crisis low as covered bond volumes dropped sharply, according to Fitch Ratingsa€™ calculations.
Non-financial corporate issuance in 2013 was 4% higher than the previous yeara€™s record level. The growth came as companies took advantage of tight spreads and low yields to refinance and extend debt maturities. It also reflects continued disintermediation in the region as corporates tap markets directly to replace bank loans. Issuance was particularly strong in the energy sector, which accounted for 17% of corporate issuance compared with 12% a year earlier. This increase was spurred by high upstream capital expenditure as high oil prices make it economical to extract oil from more technically challenging formations and geographies. The telecom and automotive sectors also saw a slight increase in their share of the corporate bond market.
By contrast, financial-sector issuance dropped by 27%, largely reflecting deleveraging of banksa€™ balance sheets. The headline figure was driven by a 47% fall in covered bond issuance, particularly from Italian and Spanish banks in the first nine months of the year. This fall highlights the deleveraging at banks in both countries, but also indicates steadily healing market conditions over the course of the year. The proportion of covered bonds as a total of financial-sector new issuance fell back to around one-third from more than 45% in the last two years.
The divergent trends mean non-financial corporates also snared a record share of EMEA issuance in 2013, with 41% of the regiona€™s total corporate issuance compared with 33% in 2012 and more than double the pre-crisis levels of 2006 and 2007. However sentiment towards financial sector issuers improved towards the end of the year, with strong Q4 issuance and spreads trading within 20bp of their non-financial counterparts a€“ the tightest since February 2008.
We expect issuance from developed-market EMEA non-financial corporates to remain strong in 2014, supported by a modest increase in capex and the continuing favourable market conditions and relatively low interest rates. Emerging-market issuance will probably face increasing headwinds from slowing growth and weakening fund flows on the back of the Federal Reservea€™s tapering programme.
We will publish more details on this data in our quarterly report a€œEMEA Corporate Bonds: Rating and Issuance Trendsa€� in early February.
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