G-250 USD New Issue Supply with Trading Indicators for April 30, 2025
Earnings Digest and New USD Supply output April 30, 2025
UBS (UBS, A3/A- Sr. Non Preferred)
• UBS reported 1Q net earnings that exceeded expectations driven by its trading units. Cash flow and earnings did not meet expectations. UBS (UBS) CET 1 capital ratio was unchanged at 14.3% in Q1. Leverage ratio however dropped to 5.6% from 5.8%. Focus was on new Swiss bank capital ratios to be instituted later this year. UBS still plans to distribute $5.6 billion to shareholders in 2025 which would be an above 10% increase. Credit quality is improving and UBS is retaining capital.
• Financial Position: UBS (UBS) debt position is now (-$18 billion) YoY, so while net debt is rising, the amount of tradable UBS debt around the globe is shrinking. Deposits are growing modestly and the company has shifted its balance sheet towards greater liquidity.
• Model Trading Indicators: UBS has sold new bonds in May of every year since 2018. While our credit trading model sees 22 UBS bonds as undervalued, there is an 84% chance we see a USD bond offering in the next 10 trading days.
Banco Santander (SANTAN, Baa1/A- Sr. Non Preferred)
• Banco Santander reported materially higher 1Q earnings results YoY but failed to meet expectations in both their result and outlook. The market is fretting over Brazil net interest income and Santander UK branch closings. CET rose to 12.1 in the quarter, and deposits rose by more than 1%. Credit quality is improving.
• Financial Position: Santander continues to grow its balance sheet to move assets into the FICC and Equity trading franchise around the world. This growth naturally has a cost as it relates to balance sheet leverage. However, the balance is less exposure to credit quality volatility and more capital flexibility.
• Model Trading Indicators: Santander for many years was a preferred long trading indicators from our credit trading model. With the new leverage comes the switch in indicators. Our trading model now sees the SANTAN secondary trading curve as an attractive short trading indicators with the SANTAN 6.938 11/07/33 the most overvalued.
Credit Agricole (ACAFP, A3/A- Sr. Non Preferred)
• Credit Ag reported strong 1Q operating results. However, net earnings that declined (-10%) as a result of higher tax charges is impacting the ACAFP equity this morning. Credit quality is improving, deposits are stable and the bank is retaining capital.
• Financial Position: If ever there were a bank capital structure not to worry about, ACAFP is the one. Issuer has more cash than debt and a 12.1 CET capital ratio.
• Model Trading Indicators: Model places only a 24% chance of new ACAFP supply in the next 10 trading days. The trading model sees the ACAFP SNP Float 09/11/28 as the most attractive ACAFP bond out of 25 liquid USD bonds.
Barclays (BACR, Baa1/BBB+ Sr. Non Preferred)
• Barclays reported record 1Q operating results that were ahead of expectation as the bank's balance sheet was slightly repositioned to more trading capital into its global franchise. Barclays is adding deposits, retaining capital and credit quality is improving as its loan book grows slightly.
• Financial Position: CET1 capital is 13.9% and Barclays has more cash than debt.
• Model Trading Indicators: Model places only a 31% chance of new BACR supply in the next 10 trading days. In February, the model indicated the BACR 5.367 02/25/31 @ 105 (bond was issues +100/5Y) and again our trading model sees that bond as the most attractive Barclays $ bond +125/5Y with (-9bp) of spread tightening.
BNP (BNP,Baa1/A-) is following up on its €5nc4 and €11nc from yesterday. Model output is:
· Benchmark 4NC3 Fxd-to-FRN (May 9, 2029) IPT +150 Area – is attractive to 122/3Y
· Benchmark 6NC5 Fxd-to-FRN (May 9, 2031) IPT +160 Area – attractive to 133/5Y
· Benchmark 4NC3 FRN (May 9, 2029) IPT SOFR Equiv is just attractive at whatever price
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