commento di jpm su tier1
· In our opinion a coordinated and potentially coercive recapitalisation of the European banking sector could be an effective intermediate remedy in the absence of a more definitive solution for the sovereign debt crisis. While many parallels have been drawn with the US TARP, we highlight that the relative success of this initiative was that available resources were far in excess of the capital which was eventually deployed. However, the €1.259 trillion exposure of core European banks to peripheral European geographies suggests a potential shortfall in available resources under certain tail scenarios. As a result we think that an optimal solution for a European bank recapitalization exercise would be for contingent capital instruments to be deployed, which would allow for available resources to be leveraged. Deploying high strike contingent capital instruments with conversion at 7% would, in our view, be a credible method in reinforcing solvency in a non-dilutive manner, which could then support equity valuations for the sector and provide greater flexibility for banks in terms of alternative capital raising. We note that such structures have been deployed before with relative success such as in the case of RBS which benefitted from an £8bn contingent capital commitment from the UK Government.
· While we view a recapitalization of the European banking sector to ultimately be a positive development, we note the negative impact on subordinated debt valuations given potentially more aggressive burden sharing outcomes. Our base case is for restrictions on discretionary coupon payments in line with previous EC remedies. We ascribe a much lower probability outcome to more aggressive outcomes such as in the case of Irish banks where legislative powers were deployed to force burden sharing on subordinated debt. Assuming that a European version of a ‘subordinated liabilities order’ is unlikely, we find the price action on certain instruments difficult to justify and think that there is selective value in the asset class at current levels. In particular, we highlight SOCGEN Tier I instruments which currently price in three years coupon deferral and extension to perpetuity. Additionally, we highlight BPCEGP Tier I instruments which price the most aggressive coupon deferral and extension outcomes despite being the French bank with the lowest relative degree of exposure to the periphery. While we note risks for Tier I, we expect senior debt to be supported with a recapitalization exercise.
While we highlight potential valuation opportunities in the Tier I market we think that the price evolution post-2007 has implied a significant loss of investor sponsorship and we anticipate that this, together with concerns on burden sharing, will imply that hurdle rates for the asset class are likely to remain above the levels more recently established in the market
per non dire quasi zero...
I agree. Bisogna aspettare la Grecia, bisogna avere tanta pazienza, non c'e' fretta.
