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September 2009 | ifr special report | 17 SPAIN Home and away

BBVA and Santander have had a pretty enviable year in Spain, managing to steer clear of some of the bigger market pitfalls, and making up considerable ground on some of their European rivals in key businesses. With the former the stronger domestically, and the latter focusing its attention abroad, the pair look like excellent examples of how to execute two distinct banking strategies. Hardeep Dhillon reports.


BVA has emerged from the financial crisis with a solid profile and a continued willingness to support its clients through lending. The Spanish bank’s debt capital markets division delivers integrated global funding to corporate clients, including both loan markets and fixed income, incorporated and co-ordinated under the head of debt capital markets, Anselmo Andrade. The bank’s high rating of Aa2, AA and AA- by Moody’s, Standard & Poor’s and Fitch respectively, underpin the strengths of the loan markets division. “BBVA’s strategy is predicated on establishing long- term relationships with clients and we are committed to supporting them by structuring and arranging their financial needs,” said Andrade. “Achieving a top league table position is important, but it should be the consequence of excellent customer relationships.”

The fixed income division has expanded it distribution capabilities, with interna- tional sales coverage growing from Southern Europe to Central Europe and Scandinavia. It has unparalleled leadership in Spain across all sectors, and this year consolidated its leadership in its domestic capital markets with a 12% global market share. In Europe, BBVA has more than doubled its market share from the previous year, with an underwritten volume that is three times higher. BBVA has shown great flexibility to adapt its product types and sector coverage as the market has evolved. The absence of securi- tisation, subordinated debt, structured products and covered bonds in the first half of the year was offset by a boom in public debt. “One of the features of the crisis is that capital markets activity has pivoted more on local demand, so our target was consolidating leadership in Spain becoming the reference for Spanish

issuers across all the products range,” said Andrade.

In Spain, BBVA has strengthened focus on 2009’s highest-growth segments, such as public sector or government guaranteed bonds, becoming the leader for both in public issues and private placements. In Europe, activity has been focussed on corporates, with a client-driven strategy closely coordinated with corporate banking and loan markets. Transactions have been more profitable as a response to the increasingly challenging market conditions, said Andrade. In the public sector, higher fees have come along wider issuance margins and more standardised fees have been set for new asset classes, like government guaranteed bonds. There is a higher fee dis- crimination for different ratings, tenors and volumes.

By product, the most remarkable growth in fixed income volumes and profitability has been the public sector, including sovereign issues, state agencies, regions and municipalities. This has been driven both by widening margins and the increase in public institutions’ funding needs. In Spain, this segment accounted for €33bn by September 2009, a doubling in volume over 2008. Financial institution GGBs account for an average of 45% of total financials issuance in Europe and 60% in Spain. Bond issuance from corporates has grown both by volumes and number of deals, with a sizeable number of inaugural issuers entering the market. Total 2009 European corporate issuance already stands at €250bn, and is expected to exceed €300bn by year end, showing a 70% increase versus 2008.

Corporate activity has been driven by a pre-financing strategy this year: many well known European names have already financed much of their 2010 financial needs, said Andrade. “We do not expect

corporate issuance to keep the same pace along the fourth quarter and we foresee new issuance to be more selective and op- portunistic, to benefit from improved financial conditions and demand niches,” he said. At the beginning of this year, financials activity was limited only to government guaranteed transactions, but the market has evolved to a point where banks are currently able to sell unsecured and even subordinated debt. The covered bonds market has resumed strongly, with financials gradually taking market share from the GGBs as the financials’ safe-haven asset. “In Spain, we expect the cedulas hipotecarias market to surge, helped by the spread tightening and market appetite,” said Andrade. Prominent transactions for BBVA in the loan markets include Enel’s €8bn facility, Iberdrola’s €5.3bn loan, Grupo Ferrovial’s €3.3bn refinancing, €3.28bn for Endesa, €2.2bn refinancing for SES and the refinancing of CEMEX. In fixed income, BBVA has lead managed Volkswagen’s €3bn dual-tranche, Enagas’ inaugural €1bn dual- tranche and Telefónica’s €2bn offering. In the public sector, BBVA has issued two deals of €7bn each for the Kingdom of Spain, two €2bn bond transactions for ICO and offerings for Comunidad de Madrid (€500m) and Generalitat de Valencia €850m.

Financials issuance includes €3bn of

BBVA’s senior benchmarks and a €1.25bn cedulas hipotecarias for Banco Popular. BBVA has been bookrunner on the majority of three-year GGB transactions from Spanish financial institutions, including benchmark issues by Banco Popular, Banco Pastor, Caixanova, Cajamar, Banco Popular, Unicaja and multi-issuer CEAMI. BBVA’s M&A advisory franchise leads the Thomson Reuters rankings in terms of value of transactions and announced deals

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