Crédit Mutuel AM: Credit markets remain resilient
By Paul Gurzal, Co-Head of Fixed Income and Jérémie Boudinet, Head of Financial and Subordinated Debt, Crédit Mutuel Asset Management
The trade agreements concluded, multiple profit warnings issued by cyclical companies and a slightly more hawkish ECB had little impact on credit markets, with subordinated debt markets continuing to perform well in July.
AT1s in USD outperformed with +1.58% and AT1s in EUR ended with a gain of +1.50%. Other segments were equally buoyant, with hybrids up +1.20%, subordinated insurance debt up +0.82% and Tier 2 bank debt in EUR up +0.69%.
The earnings season is in full swing. We consider the current half-year results of European banks to be broadly neutral from a credit perspective. The outlook for asset quality remains favourable and solvency ratios continue to be supported by satisfactory profitability indicators and optimisation of risk-weighted assets (RWA). This situation contrasts sharply with that of other cyclical sectors, such as automotive and chemicals, which have issued several profit warnings.
Mergers and acquisitions in the banking sector remain a hot topic. In Spain, the European Commission announced that it had warned the Spanish government about the risk of breaching European rules after it imposed conditions on the takeover bid launched by Spanish bank BBVA for its rival Sabadell. We expect BBVA to launch its bid anyway, potentially with an improved price. In Italy, UniCredit withdrew its bid for Banco BPM due to ‘unfulfilled conditions’ related to Italy's ‘Golden Power’, which remain under the control of the European Union. Meanwhile, in the Italian M&A industry, BPER Banca is set to take control of Banca Popolare di Sondrio after securing 58.5% acceptance of its offer, exceeding the 50% threshold. We expected the transaction to be finalised, particularly thanks to the support of their common shareholder Unipol (which holds approximately 20% of the shares in each group).
