> While Intesa Sanpaolo was rather discrete on the AT1 issuance matter, and the market was shut since the RBS and BNP deals (mid-August), the bank unexpectedly announced via a press release that it was planning to soon launch its inaugural Additional Tier 1 (USD1bn est., 10Y, write-down, low trigger, Ba3/B+/BB-). Furthermore, by end-2017, the bank is also planning to issue EUR4bn AT1 notes in total (ie, 1.4% of Q215 RWA).
> It is worth noting, and not really a surprise to us, that banks we recently spotted as potential newcomers on the segment have all announced or made a deal recently (ie, BNP Paribas, RBS, ABN Amro and Intesa Sanpaolo). At the time of writing, in our European coverage, only Commerzbank, Monte Paschi and BPCE (but the latter issues cooperative shares) haven’t issued any AT1 yet. This also goes for all smaller peripheral banks, except BPE and BOI.
> In line with other banks, the rationale of the deal for Intesa Sanpaolo is: (1) the optimisation of the capital structure, (2) a step towards filling the AT1 regulatory bucket, (3) the strengthening of the buffer for senior bondholders and depositors, while (4) this is a non-dilutive and tax-deductible instrument under the Italian tax framework.
> Intesa Sanpaolo boasts one of the strongest CET1 ratios in Europe today. We remind that Intesa Sanpaolo published a 13.3% CET1 ratio in Q215, up 40bp YoY and up 10bp QoQ, while the leverage ratio was at a very high 6.8%. The deal (if USD1bn as estimated) should add 40bp to the T1 ratio published in Q215. These numbers translate into a very comfortable EUR23bn buffer to trigger (or 8.3% CET1), well above Unicredit (EUR23bn too, but ‘only’ 5.7% CET1), due to its higher CET1.
> The MDA restriction rules that will apply to coupon payments (including AT1s) should kick-off in theory in 2016 on transitional ratios. The table below summarising those impacts for all European banks is calculated on today’s fully loaded ratio. We remind that Intesa Sanpaolo is not a G-SIFI bank (unlike Unicredit, which must hold an additional 1% capital buffer) and that Italy has not put in place any supplementary domestic risk buffer. Anyway, on today’s fully-loaded ratio and fully-loaded buffer requirements, Intesa Sanpaolo would boast a EUR23bn MDA cushion.