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Fixed Income Research
Financial Special
24 February 2017
European G-SIBs
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 2 of 40
Financials European G-SIBs
Analysts:
Michaela Hessmert
Melanie Kiene, CIIA
Of the 30 global systemically important banks (G-SIBs or G-SIFIs), 15 banks
/ banking groups are headquartered in Europe. The regulatory requirements
to be met by these institutions are particularly high. This is because they
could cause massive disruption on financial markets if a distressed or disor-
derly situation arises due to their size, complexity and/or interdependencies.
For this reason, the G20 countries made it their duty to deal with this "too big
to fail" problem (TBTF). To this end, the Financial Stability Board (FSB) was
formed in April 2009 as a successor to the Financial Stability Forum (set up
by the G7 in 1999). The FSB is a non-profit organisation headquartered in
Basel. After the G20 in 2009 officially tasked the FSB with addressing the
issue of TBTF among G-SIBs, the G20 endorsed the "FSB framework
agreement" to reduce the moral hazard posed by G-SIBs in 2010. This
framework presents a range of measures to "reduce the probability of a bank
failure". These not only include the requirement to hold sufficient loss-
absorbing capital (in parallel to the existing capital requirements), but also
intensive and effective supervision of G-SIBs. The measures also include
recovery and resolution planning and cross-border cooperation between
authorities for dealing with crises.
Development of capital requirements
2,0% 2,0% 3,5% 4,0% 4,5% 4,5% 4,5% 4,5% 4,5%
0,6%1,3% 1,9% 2,5%
0,6%1,3%
1,9%2,5%
0,6%
1,3%
1,9%
2,5%
2,0% 2,0%
1,0%1,5%
1,5%
1,5%
1,5%
1,5%
1,5%
4,0% 4,0%3,5%
2,5%2,0%
2,0%
2,0%
2,0%
2,0%
8,0% 8,0% 8,0% 8,0% 8,0%
9,8%
11,9%
13,7%
15,5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Basel II 2012 2013 2014 2015 2016 2017 2018 2019
Tier 2 Capital
AT1 Capital
G-SIBs Buffer
Countercyclical Capital Buffer
Capital Conservation Buffer
CET1 Capital
0-0- 0-
0-0-
0-
0-
0-
Phase-in of regulatory deductions
(% of deductions to be applied)
100%80%60%40%20%
Phase-out of non-compliant non-common Tier 1 and Tier 2 capital
(up to 100% in 2022) issued before 12-Sep-2010 (% of ineligible)
60%50%40%30%20%10% 70%
Phase-out of non-compliant public sector
capital injections (% of ineligible)
100%100%0%0%
Common
Equity
Tier 1
Capital
Source: AFME, NORD/LB Fixed Income Research
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 3 of 40
Capital requirements have
been rising steadily since the
financial markets crisis
The chart showing the trend in capital requirements shows very clearly the
stricter requirements with regard to the quality and quantity of capital held by
banks. Due to this improvement in capitalisation, banks have in principle
become more crisis-resistant. This was one of the primary goals obtained as
a "lesson" from the financial markets crisis. Certain underlying conditions
had to be created in order that the relevant authorities could apply the bail-in
framework in the event of a potential bank resolution. This framework would
enable them to make write-downs or convert liabilities into equity capital,
which could then be used either for loss absorption or recapitalisation.
Among other things, the banks are required to have sufficient loss-absorbing
capital.
European G-SIBs
G-SIBAdditional capital
buffer in %
Rating
(Fitch / Moodys / S&P)5y CDS in bp Internet link
Barclays 1.5 A / Baa2 / BBB 76 www.home.barclays
BNP Paribas 2.0 A+ / A1 / A 90 invest.bnpparibas.com
Credit Suisse 1.5 A- / Baa2 / BBB+ 115 www.credit-suisse.com
Deutsche Bank 2.0 A- *- / Baa2 / BBB+ *+ 151 www.db.com
Groupe BPCE 1.0 A / A2 / A - www.groupebpce.fr
Groupe Crédit Agricole 1.0 A / A1 / A 82 www.credit-agricole.com
HSBC 2.0 AA- / A1 / A 65 www.hsbc.com
ING Bank 1.0 A+ / Baa1 / A- 66 www.ing.com
Nordea 1.0 AA- / Aa3 / AA- 49 www.nordea.com
Royal Bank of Scotland 1.0 BBB+ / Ba1 / BBB- 101 www.investors.rbs.com
Santander 1.0 A- / A3 / A- 108 www.santander.com
Société Générale 1.0 A / A2 / A 90 www.societegenerale.com
Standard Chartered 1.0 A+ / A1 / BBB+ 92 investors.sc.com
UBS 1.0 A / Ba1 (hyp) / A- 56 www.ubs.com
Unicredit Group 1.0 BBB+ / Baa1 / BBB- 169 www.unicreditgroup.eu
As of: 17 February 2017 Source: SNL, NORD/LB Fixed Income Research
FSB published TLAC
requirements in
November 2015
With reference to the requirement on G-SIBs to hold sufficient loss-
absorbing capital, a proposal was developed by the FSB jointly with the Ba-
sel Committee on Banking Supervision. It was published for the first time in
November 2014. It was followed by a consultation phase and impact as-
sessment study. In November 2015, the final Principles and Term Sheet
relating to the FSB's Total Loss-Absorbing Capacity (TLAC) was reported to
the G20. This document represents a new international standard for G-SIBs,
with its implementation monitored by the FSB. The table shows the 15 Euro-
pean G-SIBs in alphabetical order, along with their individual additional capi-
tal buffer (G-SIB buffer).
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 4 of 40
Bail-in is one of four possible
options in the course of a
bank resolution
The bail-in is only one of four options that are possible in the course of a
bank resolution. Other tools include the sale of business units, bridging insti-
tutions and asset separation. Both TLAC and MREL pursue the same objec-
tive, namely improving the actual resolution capability of relevant institutions
and shielding taxpayers from potential losses.
TLAC requirement
Source: NORD/LB Fixed Income Research
In order to meet TLAC requirements as a G-SIB, the relevant institutions
must hold sufficient loss-absorbing capital. Although the minimum require-
ments of the FSB are known, they still have to be implemented in the EU
and harmonised with MREL requirements. Capital buffers such as the capital
conservation buffer, the G-SIB buffer and the countercyclical buffer are re-
quirements that are additional to the TLAC, and which must be formed with
hard core capital. European G-SIBs have a range of different needs to build
up TLAC capital.
TLAC minimum requirement The specific minimum requirements with regard to TLAC will occur in stages:
Starting from 2019: 16% of RWAs / 6% of Basel III leverage ratio
Starting from 2022: 18% of RWAs / 6.75% of Basel III leverage ratio
In addition, Pillar 2 requirements are possible in particular cases.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 5 of 40
MREL / TLAC – overview of key features
MREL TLAC
Scope all banks within the scope of BRRD G-SIBs
Timeline 1 January 2016 with transitional period 1 January 2019
Calculation and
Determination case-by-case for each institution (incl. Pillar 1 and Pillar 2)
common Pillar 1 requirement
1 January 2019: 16% of RWA / 6% of Basel III LR
1 January 2022: 18% of RWA / 6,75% of Basel III LR
Capital buffers included excluded
Subordinaton requirement No. Not a preconditon in the BRRD
Yes. Via:
● structural subordination
● statutory subordination
● contractual subordination
Eligible instruments
own funds = Tier 1 capital + Tier 2 capital
eligible liabilities:
● liabilities and capital instruments that do not qualify as CET 1,
AT 1 or Tier 2 and that are not exclued from the scope of the
bail-in tool by virtue of Article 44(2)
● issued and fully paid up
● not owed to, secured or guaranteed by the institution itself
● not arising from a derivative
● Knot arising from a preferred deposit
● remaining maturity of at least one year
total capital = Tier 1 capital + Tier 2 capital
TLAC-eligible liabilities:
● liabilities that can be effectively written down or converted
into equity without giving rise to material "NCWO" claims
● be paid in and be unsecured
● not subject to set off or netting rights
● minimum remaining maturity of at least one year
● not be redeemable by the holder
● not insured deposits
● not sight and short term deposits
● not liabilities arising from derivatives
● not liabilities which are preferred to normal senior unsecured
creditors unter the relevant insolvency law
● not any liabilities that are excluded from bail-in by law
�
�
�
Source: BRRD, European Commission, FSB, NORD/LB Fixed Income Research
Forms of subordination While subordination of TLAC-eligible liabilities is explicitly required for TLAC
from a regulatory viewpoint, this is not the case for MREL subject to the
BRRD. However, in the course of the harmonisation with the TLAC require-
ments that is being pursued, it is likely that subordination will also be re-
quired, at least for domestic systemically important banks (D-SIBs), in order
to prevent potential problems in relation to the "no creditor worse off" princi-
ple (NCWO) from arising in the first place. Since the European Commission
is still working on harmonising the MREL requirements, some of the key
features specified in the table are still subject to change. As a result, it is
likely that the denominator in the MREL calculation will be aligned with that
of TLAC (RWA and exposure instead of equity and total liabilities).
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 6 of 40
Current implementation of the required subordination in Europe
1 Preferred vanilla short, medium and long term debt, structured notes, net derivatives liabilities, other
Source: NORD/LB Fixed Income Research
Different implementations in
Europe
The national implementations of the bail-in regime led to different paths be-
ing taken when selecting the required subordination. Basically, three options
are available. Structural subordination, statutory subordination and contrac-
tual subordination. In the case of structural subordination, bonds are issued
at the level of the holding company (HoldCo), which also constitutes the
resolution unit. These bonds therefore have structural subordination com-
pared to bonds that are issued by the operating company (OpCo). American,
British and Swiss banks use this form of subordination to issue TLAC-eligible
bonds. The Dutch bank, ING, operates through its HoldCo and so follows the
path of structural subordination. Germany and Italy decided on statutory
subordination and accordingly adapted the hierarchy of liability for all out-
standing bonds. In France, too, a new asset category was established by law
in December 2016: "non-preferred" senior bonds. These bonds are classified
contractually between subordinated and senior unsecured. The Spanish
bank Banco Santander also subscribes to the new asset category.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 7 of 40
French method is to become
European method
The different variants of subordination in relation to senior bonds result in
confusion on the part of investors in bank bonds and to high fragmentation of
this asset category. The European Commission made an attempt at damage
limitation in November 2016 by declaring (in draft form) the French method
using the statutory introduction of a new asset category, "non-preferred"
senior bonds, as the European method. This is scheduled to be implemented
in the eurozone by mid-2017. The subordination of TLAC-eligible bonds will
then be achieved de facto either through the structural variant or the (poten-
tially standardised) statutory method. Countries that have already introduced
a bail-in regime, including Germany and Italy, will not be able to avoid mak-
ing adjustments.
Future harmonised procedure for the required subordination
COMMON EURESULOTIONFRAMEWORK
Covered deposits (OpCo)/ Deposit Guarantee
Schemes
Eligible deposits fromSMEs and naturalpersons (OpCo)
LIQUIDATIONINSTRUMENTS´ RANK DEPENDENT ON NATIONAL INSOLVENCY LAW
NCWOL
Seniorunsecuredliabilities(OpCo)
Non-eligible
deposits(OpCo)
Senior unsecuredliabilities(HoldCo)
Equity
TLACeligible
Tier 2(OpCo) Tier 2
(HoldCo)
AT1(OpCo) AT1
(HoldCo)
Covered deposits / Deposit Guarantee
Schemes
Eligible deposits fromSMEs and natural
persons
Other sub debt
Tier 2
AT1
Equity
PreferredSenior
liabilities1
Non-eligible
deposits
Non-PreferredSenior unsecured debt
Source: NORD/LB Fixed Income Research
Different valuations by the
rating agencies
The rating agencies rate the new asset category "non-preferred" seniors
differently. While Fitch does not make any distinction between this and the
issuer's "old" senior bonds, Moody's assesses the bonds as existing subor-
dinated notes. In contrast, S&P classifies the "non-preferred" seniors
between existing senior and subordinated bonds.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 8 of 40
Selected metrics for European G-SIBs (data as of December 2016)
Institutions Total Assets
in EUR m
Core Tier 1 Ratio (%)
Gross Im-paired Loans
/ Loans at Amortised Cost (%)
ROAE (%) Net Interest Margin (%)
Cost-to-Income (%)
Tier 1 Leverage
Ratio
Barclays 1,420,807 12.40 NA 2.55 NA NA NA
BNP Paribas 2,076,959 11.61 5.65 5.93 N/A N/A 4.31
Credit Suisse 64,973 13.59 N/A -21.48 0.89 137.22 N/A
Deutsche Bank 1,591,000 13.53 1.80 N/A N/A 126.65 N/A
Groupe BPCE 1,235,240 14.14 3.45 4.16 N/A N/A N/A
Groupe Crédit Agricole 1,524,200 12.07 N/A 2.45 N/A N/A N/A
HSBC 2,251,961 13.60 2.10 -8.50 NA 95.01 5.62
ING Bank 843.91 12.58 2.34 N/A N/A N/A N/A
Nordea 615,659 18.43 2.26 13.86 0.84 50.97 4.54
Royal Bank of Scotland 935,382 13.40 NA -33.22 NA NA NA
Santander 1,339,125 12.53 4.13 7.47 2.64 51.05 N/A
Société Générale 1,382,241 11.80 5.36 3.09 N/A N/A N/A
Standard Chartered 613,193 13.59 3.74 -3.97 1.20 83.62 6.35
UBS 872,448 16.76 0.32 5.45 0.80 87.68 4.88
Unicredit Group 859,533 8.15 6.6 -109.33 N/A N/A N/A
Source: SNL, NORD/LB Fixed Income Research
Key figures The metrics presented in the table show that all the European G-SIBs ex-
ceed regulatory capital requirements to varying degrees. In the case of
UniCredit, the loss for the year caused a substantial drop in the hard core
capital ratio. However, this was "remedied" through the capital increase of
EUR 13bn. Due to the bail-in regime that has now been established, it has
become more important for investors to look at the quality of equity capital
and quasi-capital instruments in order to make a better assessment of the
risk of senior bonds. The institutions will continue to follow the topic of profit-
ability and dependence on the net interest margin this year. This topic in-
creases the pressure to seek alternative sources of income (independent of
interest income). The banks will continue with their efforts to cut costs.
Spread trend: Barclays OpCo vs. Barclays HoldCo
Spread trend: HSBC OpCo vs. HSBC HoldCo
-20
0
20
40
60
80
100
120
140
26.10.2016 25.11.2016 25.12.2016 24.01.2017
ASW
BACR 2.125 02/24/2021 OpCo BACR 1.5 04/01/2022 HoldCo
-10
0
10
20
30
40
50
60
70
80
26.10.2016 25.11.2016 25.12.2016 24.01.2017
ASW
HSBC 4 01/15/2021 OpCo HSBC 1.5 03/15/2022 HoldCo
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 9 of 40
Spread trend: RBS OpCo vs. RBS HoldCo
Spread trend: Standard Chartered Senior Unsecured
30
40
50
60
70
80
90
100
26.10.2016 25.11.2016 25.12.2016 24.01.2017
ASW
RBS 5.375 09/30/2019 OpCo RBS 1.625 06/25/2019 HoldCo
0
10
20
30
40
50
60
70
80
90
26.10.2016 25.11.2016 25.12.2016 24.01.2017
ASW
STANLN 1.625 06/13/2021 STANLN 1.625 11/20/2018
STANLN 4.125 01/18/2019
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Spread trend: BNP Senior Unsecured vs. Senior Non Preferred
Spread trend: SocGen Senior Unsecured vs Sen. Non Preferred
20
30
40
50
60
70
80
90
100
110
05.01.2017 20.01.2017 04.02.2017
ASW
BNP 2.875 09/26/2023 BNP 1.125 10/10/2023 SNP
20
30
40
50
60
70
80
90
100
16.12.2016 31.12.2016 15.01.2017 30.01.2017 14.02.2017
ASW
SOCGEN 4.25 07/13/2022 SOCGEN 1 04/01/2022 SNP
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Spread trend: Crédit Agricole Senior Unsecured vs. SNP
Spread trend: BPCE Senior Unsecured vs. Senior Non Preferred
20
40
60
80
100
120
140
15.12.2016 04.01.2017 24.01.2017 13.02.2017
ASW
ACAFP 1.875 12/20/2026 SNP ACAFP 1.25 04/14/2026
20
30
40
50
60
70
80
90
100
110
12.01.2017 22.01.2017 01.02.2017 11.02.2017
ASW
BPCEGP 1.125 01/18/2023 SNP BPCEGP 4.25 02/06/2023
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 10 of 40
Spread trend: UBS OpCo vs. UBS HoldCo
Spread trend: CS OpCo vs. CS HoldCo
0
10
20
30
40
50
60
70
80
90
11.11.2016 11.12.2016 10.01.2017 09.02.2017
ASW
UBS 1.25 09/03/2021 OpCo UBS 1.75 11/16/2022 HoldCo
0
20
40
60
80
100
120
140
11.11.2016 11.12.2016 10.01.2017 09.02.2017
ASW
CS 1.375 01/31/2022 OpCo CS 1.25 04/14/2022 HoldCo
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Spread trend: Deutsche Bank Senior Unsecured
Spread trend: ING Senior Unsecured
80
100
120
140
160
180
200
11.11.2016 11.12.2016 10.01.2017 09.02.2017
ASW
DB 2.375 01/11/2023 DB 1.25 09/08/2021
DB 1.125 03/17/2025 DB 1.5 01/20/2022
-5
0
5
10
15
20
25
30
35
40
03.10.2016 02.11.2016 02.12.2016 01.01.2017 31.01.2017
ASW
INTNED 0.7 04/16/2020 INTNED 0.75 02/22/2021
INTNED 1.25 12/13/2019 INTNED 4.5 02/21/2022
INTNED 4.875 01/18/2021 INTNED 0.75 11/24/2020
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Spread trend: UniCredit Senior Unsecured
Spread trend: Nordea Senior Unsecured
90
95
100
105
110
115
11.11.2016 11.12.2016 10.01.2017 09.02.2017
ASW
UCGIM 2.125 10/24/2026 UCGIM 3.25 01/14/2021
UCGIM 3.625 01/24/2019 UCGIM 4.375 01/29/2020
UCGIM 1.5 06/19/2019 UCGIM 2 03/04/2023
0
5
10
15
20
25
30
35
40
45
11.11.2016 11.12.2016 10.01.2017 09.02.2017
ASW
NDASS 1 02/22/2023 NDASS 1.125 02/12/2025
NDASS 2 02/17/2021 NDASS 3.25 07/05/2022
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 11 of 40
Spread trend: Santander SNP vs. Santander Cons. Finance
Comments on the spread charts:
60
70
80
90
100
110
120
30.01.2017 03.02.2017 07.02.2017 11.02.2017 15.02.2017
ASW
SANTAN 1.375 02/09/2022 SANSCF 0.875 01/24/2022
In the case of institutions that issue TLAC-eligible bonds using structural subordination, we have select-ed one HoldCo and one OpCo bond in each case for comparison purposes. Banks that issue ''non-preferred" seniors have as a comparison a senior unsecured bond based on the "old" interpretation. Where it was not possible to make a comparison between "subordinate" seniors and "normal" seniors, we used outstanding eurozone benchmark bonds in the senior unsecured format and we show the corre-sponding ASW spreads.
As of: 17 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
Spread comparison The selected spread comparisons aim primarily at developing a feeling as to
how the fragmentation of senior unsecured bonds impacts on the relevant
spreads. They show that the new asset category "non-preferred" senior is
priced above the plain vanilla senior unsecured bonds in the risk premium,
thus reflecting the higher bail-in risk. The same applies to senior unsecured
bonds of the HoldCo in comparison with the equivalents that were issued by
the OpCo. As TLAC-eligible bonds make more progress in becoming estab-
lished, we expect spreads to narrow slightly. Generally speaking, however,
"subordinate" seniors will react with more risk sensitivity to any change in the
market environment. We see a number of potential event risks (especially of
a political nature) this year that could lead to increased volatility, although at
present they are outweighed by the ECB's policy with its positive impact on
credit markets.
Spread development: issues by G-SIBs since 1 December 2016
BPC
EG
P
1 1
/8
01/1
8/2
3 1
0.0
1.2
017
ISPIM
1 3
/8 0
1/1
8/2
4
11.0
1.2
017
BN
P 1
1/8
10/1
0/2
3
03.0
1.2
017
SO
CG
EN
1 0
4/0
1/2
2
14.1
2.2
016
AC
AFP 1
09/1
6/2
4
09.0
1.2
017
BA
CR
1 7
/8 1
2/0
8/2
3
01.1
2.2
016
BN
P 0
1/2
06/0
1/2
2
24.1
1.2
016
AC
AFP 0
.972 0
7/3
1/2
4
24.0
1.2
017
DB
1 1
/2 0
1/2
0/2
2
16.0
1.2
017
AC
AFP 1
7/8
12/2
0/2
6
13.1
2.2
016
SA
NS
CF 0
7/8
01/2
4/2
2 1
0.0
1.2
017
SA
NTA
N 1
3/8
02/0
9/2
2 2
6.0
1.2
017
0
20
40
60
80
100
120
140
160
bp
ASW at issue ASW as of 17 Feb iTraxx at issue
As of: 08 February 2017 Source: Bloomberg, NORD/LB Fixed Income Research
New issues since 1 Decem-
ber 2016
Since the start of December, a total of eleven senior bonds were issued by
European G-SIBs. These are both TLAC-eligible bonds and non-
subordinated, unsecured senior bonds.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 12 of 40
New sub-indices from Markit The index provider Markit has expanded its universe. Its nine sub-indices
now offer a more differentiated overview of the fragmented market for the
asset category senior unsecured bonds. The following new sub-indices have
existed since the start of February 2017:
Name ISIN_CPi ISIN_TRi BBG_Ticker_CPi BBG_Ticker_TRi
Markit iBoxx EUR Banks Senior Bail-in GB00BYYS5S02 GB00BYYS5M40 IBXXEBS1 IBXXEBS4
Markit iBoxx EUR Banks Senior Bail-in Mid Price GB00BYYS5243 GB00BYYS5359 IBXXEBS2 IBXXEBS3
Markit iBoxx EUR Banks Senior Preferred GB00BYYS5680 GB00BYYS5797 IBXXEBS5 IBXXEBS8
Markit iBoxx EUR Banks Senior Preferred Mid Price GB00BYYS5466 GB00BYYS5573 IBXXEBS6 IBXXEBS7
Markit iBoxx GBP Banks Senior Bail-in GB00BYYS5L33 GB00BYYS5R94 IBXXGBS1 IBXXGBS4
Markit iBoxx GBP Banks Senior Bail-in Mid Price GB00BYYS4W72 GB00BYYS4X89 IBXXGBS2 IBXXGBS3
Markit iBoxx GBP Banks Senior Preferred GB00BYYS5029 GB00BYYS5136 IBXXGBS5 IBXXGBS8
Source: Markit, NORD/LB Fixed Income Research
iBoxx EUR Banks Senior
Bail-in
iBoxx EUR Banks Senior Bail-in currently comprises a total of 111 bonds
with a volume of EUR 131.5bn that are bail-in-eligible. Specifically this
means that bonds reaching bail-in eligibility through one of the three possible
methods of "subordination" of senior unsecured bonds are listed here. Sen-
ior bonds from the US, UK and Switzerland (in the chart under "Other"), is-
sued within the scope of structural subordination through the Holding Com-
pany (HoldCo), represent the largest proportion in the index. The French
"non-preferred" seniors are included in the index through statutory subordi-
nation, as are German senior unsecured bonds.
iBoxx EUR Banks Senior Bail-in iBoxx EUR Banks Senior Preferred
As of: 14 February 2017 Source: Markit, NORD/LB Fixed Income Research
As of: 14 February 2017 Source: Markit, NORD/LB Fixed Income Research
iBoxx EUR Banks Senior
Preferred
With 264 bonds, the iBoxx EUR Banks Senior Preferred Index comprises
significantly more senior bonds than the iBoxx EUR Banks Senior Bail-in
Index (outstanding volume: EUR 265.3bn). French bonds make up the big-
gest part with 62 bonds, followed by the Netherlands with 35 seniors and the
UK with 27 bonds. German bonds are not included since, due to statutory
subordination, all outstanding German plain vanilla senior unsecured bonds
are bail-in-eligible.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 13 of 40
iBoxx EUR Banks Senior Bail-in iBoxx EUR Banks Senior Preferred
As of: 15 February 2017 Source: Markit, Bloomberg, NORD/LB Fixed Income Research
As of: 15 February 2017 Source: Markit, Bloomberg, NORD/LB Fixed Income Research
Spreads Due to the higher risk profile, the spreads of the iBoxx EUR Banks Senior
Bail-in Index are above the spreads of the iBoxx EUR Banks Senior Pre-
ferred Index. We expect that initially the HoldCo issues in the Senior Bail-in
Index in particular will rise, since after France, only Spain has taken the fu-
ture "European path" of “non-preferred” seniors for the time being. The euro-
zone countries are required to revise their bail-in regime likewise by mid-year
and either adapt the French variant or issue bail-in-eligible bonds through
the HoldCo. It is still unclear how Germany will position itself in relation to
these efforts at harmonisation. After all, a bail-in regime has existed since
the start of the year, providing for the statutory subordination of all outstand-
ing plain-vanilla senior bonds. We expect at least an amendment to the law
such that German institutions will in future be given the option of issuing
plain-vanilla senior preferred bonds.
Funding
G-SIB TLAC-funding in 2017 G-SIB TLAC-funding in 2017
Barclays GBP 6.0 bn Nordea NA
BNP Paribas EUR 10.0 bn Royal Bank of Scotland GBP 3.0 - 5.0 bn
Credit Suisse CHF 10.0 - 12.0 bn Santander EUR 12.0 - 14.0 bn
Deutsche Bank EUR 11.0 - 14.0 bn Société Générale EUR 9.0 bn
Groupe BPCE EUR 1.5 - 3.5 bn Standard Chartered NA
Groupe Crédit Agricole EUR 4.5 bn UBS NA
HSBC ~ USD 20.0 bn Unicredit Group ~EUR 10.0 bn
ING Bank ~ EUR 5.0 - 8.0 bn
As of: 16 February 2017 Source: Issuer, NORD/LB Fixed Income Research
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 14 of 40
Funding Most G-SIBs announced their funding plans for this year no later than the
publication of their figures for the 2016 financial year. Since funding in 2017
is dominated quite strongly by future requirements for holding sufficient loss-
absorbing capital, it is no wonder that G-SIBs plan to issue a relatively large
number of TLAC-eligible bonds. This trend will continue in the years to
come. It is likely that maturing senior unsecured bonds from operating com-
panies will tend to be replaced through the structurally subordinate securities
of the holding companies. Additionally, following the debut of French "non-
preferred" senior issues in this segment, we expect issuing activity to in-
crease once again starting from mid-2017 at the latest if this form of statutory
subordination is introduced in other European countries.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 15 of 40
Annex Short profiles: European G-SIBs
Barclays Barclays PLC is the holding company of Barclays Bank PLC, a global British
universal bank which is listed among the global systemically important banks
(additional capital buffer: 1.5%). Barclays offers its customers all products
and services in retail, corporate and investment banking as well as the credit
card business and asset management. The institution operates with a strong
presence in the two defined home markets, the UK and the US, via the units
Barclays UK (RFB) and Barclays International (BB PLC). Both divisions take
into account the future UK regulatory requirements concerning separation of
the relatively low-risk retail business on the one hand, and the higher-risk
capital market and wholesale clients on the other (ring-fencing). Barclays UK
comprises retail banking, the credit card business, asset management and
corporate banking for smaller businesses in the UK. With about 22m personal
customers and almost a million business clients, this unit will be the UK ring-
fenced bank from 2019 onwards. Barclays International consists of the capital
market and wholesale client business, the European and U.S. credit card
business as well as international asset management. The restructuring pro-
cess as set out in the Business Plan provides for regulatory deconsolidation
of Africa Banking. Barclays Non-Core Unit comprises those assets and busi-
ness branches that are no longer part of the future business strategy. The
closure of the Non-Core Unit was announced six months early at June 2017
with remaining RWAs of GBP 25bn. Although the bank was found to have
inadequate capital in the course of a stress test by the Bank of England, the
supervisory authority believes it is not necessary to adapt the existing plan to
strengthen the bank's capital adequacy.
Homepage
www.barclays.com
Ratings
Rating Outlook
Fitch A Stable
Moody's Baa2 Negative
S&P BBB Negative
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,614,578 1,748,934 1,519,816 1,420,808
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Senior Financials BARCLAYS PLC
Loans to customers 545,651 580,431 569,387 475,831
Customer deposits 528,811 560,148 575,720 495,624
Net interest income 13,665 14,991 N/A 12,900
Earnings before tax 3,378 2,800 1,579 NA
Net interest margin 1.43 1.58 N/A NA
Cost-income ratio 73.64 69.23 82.35 NA
Return on average equity 2.15 1.29 0.93 4.09
Tier 1 common capital ratio 13.19 10.17 11.37 12.40
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC Barclays published its figures for the 2016 financial year on 23 February
2017. The funding plan for 2017 expects TLAC/MREL-eligible issues (AT1,
Tier 2 and Seniors) in a volume of GBP 10.0bn.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 16 of 40
BNP Paribas With more than 190,000 employees in 74 countries, BNP Paribas SA (BNP) is
one of the largest banks in the world and is classified as a global systemically
important bank (additional capital buffer: 2%). The largest shareholder (Feb-
ruary 2017) is the Société Fédérale de Participations et d'Investissement,
whose sole owner is the Belgian state. It holds 10.2%. Organisationally, BNP
Paribas is divided into two main segments, namely “Retail Banking and Ser-
vices” and “Corporate and Institutional Banking”. The Retail Banking and
Services segment is divided into Domestic Markets (DM), which covers
France, Belgium, Italy and Luxembourg, and International Financial Services,
which is in turn divided into Personal Finance, International Retail Banking,
Wealth Management, Investment Partners and Real Estate. In addition to
Corporate Banking and Global Markets, the Corporate and Institutional Bank-
ing segment also comprises the Securities Services section. The target of the
cost-cutting programme "Simple & Efficient", which ran until the end of 2016,
was successfully achieved. Since its introduction in 2013, for example, EUR
3.3bn was saved. The new Business Plan 2020 sets its target as a CET1 ratio
of 12% and a leverage ratio of 4%. The CIR is expected to be reduced to 63%
by 2020 and the profitability target (ROE) is set at 10%.
Homepage
group.bnpparibas
Ratings
Rating Outlook
Fitch A+ Stable
Moody's A1 Stable
S&P A Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,810,522 2,077,758 1,994,193 2,173,877
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Senior Financials BNP PARIBAS
Loans to customers
612,940 658,351 682,963 690,082
Customer deposits 553,497 641,549 700,309 741,897
Net interest income 19,451 20,319 22,553 N/A
Earnings before tax 8,101 3,150 10,379 N/A
Net interest margin 1.13 1.13 1.13 N/A
Cost-income ratio 66.47 66.62 65.20 N/A
Return on average equity 5.76 0.55 7.23 8.60
Tier 1 common capital ratio 11.74 10.50 11.05 11.57
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC On 7 February 2017, BNP published its figures for the whole of 2016. The
annual funding requirement for 2017 is again put at EUR 25bn. In order to
comply with the TLAC requirement, EUR 10bn in "non-preferred" senior
bonds is to be issued in 2017. EUR 2.7bn has already been issued.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 17 of 40
BPCE Groupe BPCE is the second-biggest banking group in France with a strong
market position in its domestic market. It was formed from the merger of the
two central institutions of the Caisses d'Epargne (savings banks) and
Banques Populaires (cooperative banks). The shareholder structure includes
17 Caisses d'Epargne (holding 50% of the shares) and 18 Banques Popu-
laires (likewise 50%). With about 8,000 branches in 46 countries, it offers the
complete product and service portfolio of a universal bank. BPCE SA (BPCE)
is the central bank within France's Groupe BPCE (Groupe). In addition to
BPCE SA, the sub-group of the BPCE Group also includes a number of other
subsidiaries, including NATIXIS with a focus on CIB, asset management and
capital market-related services and the wholly owned subsidiaries Crédit
Foncier de France (CFF), Banque Palatine and BPCE International. BPCE
offers a broad range of products with a focus on private clients and insurance.
BPCE take a central position within the Groupe. It is responsible for the
Group's strategy, coordination and management, performing duties such as
liquidity management for the Group, capitalisation and risk management. It is
classified as a G-SIB by the FSB (+1% additional capital buffer). Fully loaded,
the CET 1 ratio was 14.2% (December 2016) and the leverage ratio improved
to 5% as at year-end 2016.
Homepage
www.groupebpce.fr
Ratings
Rating* Outlook
Fitch A Stable
Moody's A2 Stable
S&P A Stable
Rating of BPCE SA
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m)
2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,124,857 1,223,298 1,166,535 1,235,240
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Senior Financials BPCE
Loans to customers 579,062 621,518 627,238 666,898
Customer deposits 458,013 473,845 499,741 531,778
Net interest income N/A 11,542 11,059 N/A
Earnings before tax 4,878 5,279 6,123 N/A
Net interest margin N/A 1.06 0.99 N/A
Cost-income ratio 70.19 68.45 66.86 N/A
Return on average equity 5.33 5.51 6.00 6.76
Tier 1 common capital ratio
N/A 11.86 13.02 14.14
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC At the investor presentation in January 2017, BPCE specified a funding tar-
get to meet TLAC requirements of between EUR 1.5bn to EUR 3.5bn per
year. This is to be achieved through Tier 2 bonds, in addition to issuing "non-
preferred" seniors. "Preferred" seniors are not to be used to comply with
TLAC requirements. The funding requirement of BPCE for TLAC is essential-
ly manageable, as capitalisation was significantly strengthened in recent
years.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 18 of 40
Crédit Agricole Crédit Agricole S.A. is a banking group organised on cooperative lines, tradi-
tionally with a strong link to agriculture. It is listed among the global systemi-
cally important banks (additional capital buffer: 1%). The credit institution has
around 140,000 employees and operates in 52 countries. It offers its 52 mil-
lion customers all the products of a universal bank across more than 11,000
branches. Crédit Agricole is at the head of 39 regional banks in which the
bank itself holds 25% and in turn, through the holding company SAS Rue la
Boétie, they hold 56.7% of the shares in Crédit Agricole. The bank's busi-
ness operations are divided into French Retail Banking, International Retail
Banking, Specialised Financial Services, Savings Management & Insurance,
Corporate & Investment Banking and Asset Management. At almost 50%,
about half of the loan portfolio is attributable to the French market. A further
25.5% is accounted for by the Western European market, with the Italian
market making up around 45% of it. Within the framework of "Strategic Ambi-
tion 2020", the CET1 ratio is to be increased to 16% (Crédit Agricole Group)
or, as the case may be, 11% (Crédit Agricole S.A.) and net earnings to EUR
7.2bn and EUR 4.2bn respectively by 2019. Over the same period, the cost-
income ratio is to be reduced to less than 60% and investment of EUR 7.7bn
made in digitalisation, among other projects. The aim is also to distribute
50% of profit to shareholders.
Homepage
www.credit-agricole.com
Ratings
Rating Outlook
Fitch A Positive
Moody's A1 Stable
S&P A Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets
1,518,811 1,589,044 1,529,294 1,524,200
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Senior Financials CREDIT AGRICOLE
Loans to customers 304,018 314,839 331,597 346,300
Customer deposits 477,313 477,798 512,974 521,800
Net interest income 12,685 11,347 11,558 N/A
Earnings before tax 2,927 3,235 3,811 N/A
Net interest margin 0.78 0.79 0.79 N/A
Cost-income ratio 64.71 66.77 64.94 N/A
Return on average equity 6.26 5.29 6.83 6.37
Tier 1 common capital ratio 9.96 10.39 10.79 12.07
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Re-search
Funding and TLAC Crédit Agricole published its figures for the whole of 2016 on 15 February
2017. In order to protect the creditors of senior preferred bonds, CA is
planning to issue "non-preferred" seniors. The institution has already
begun to do so in December 2016, with the debut of a "non-preferred"
senior bond. For 2017 the funding programme was set at EUR 16bn
(EUR 11.5bn senior preferred bonds and EUR 4.5bn subordinated and
"non-preferred" senior bonds).
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 19 of 40
Credit Suisse Credit Suisse Group AG (CS) is a global financial services group with more
than 47,000 employees in about 50 countries. It is the second-largest finan-
cial institution in Switzerland. CS is a global systemically important bank (ad-
ditional capital buffer: 1.5%). With assets under management of CHF
1,255.2bn, it is one of the largest asset managers in the world. Organisation-
ally, Credit Suisse is divided into three divisions, each with a regional focus:
Swiss Universal Bank, International Wealth Management and Asia Pacific. It
also has two supporting divisions: Global Markets and Investment Banking &
Capital Markets. The Strategic Resolution Unit (SRU; 19.7% of RWA) deals
with winding up positions and business areas that are no longer taken into
account in the future strategy. A settlement with the U.S. Department of Jus-
tice (DoJ) in connection with RMBS transactions was reached in January
2017. In addition to a fine of USD 2.48bn, CS also undertook to make com-
pensation payments to clients amounting to USD 2.8bn. The agreement with
the DoJ affected the CET1 ratio (fully loaded): instead of 12.5% it was 11.6%
as a result. The cost-cutting target for 2016 (budget > CHF 1.4bn) was ex-
ceeded, at CHF 1.9bn. A cost reduction programme is to be implemented
more quickly due to the challenging environment. The target for the fixed cost
reduction by the end of 2018 was raised from CHF 3.5bn to > CHF 4.2bn. As
capital target for 2018, CS is aiming at a CET1 ratio of >13% (fully loaded),
plus corresponding buffer. The Tier 1 leverage ratio (fully loaded) is to be
about 5% by 2018 (FY 2016: 3.3%).
Homepage
www.credit-suisse.com
Ratings
Rating Outlook
Fitch A- Stable
Moody's (P)Baa2 Stable
S&P BBB+ Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 712,338 766,431 754,734 764,973
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Senior Financials CREDIT SUISSE LD
Loans to customers 198,179 223,451 248,247 257,509
Customer deposits 271,850 306,966 315,119 332,022
Net interest income 6,595 7,439 8,713 6,939
Earnings before tax 3,329 2,986 -2,269 -1,804
Net interest margin 1.05 1.17 1.23 1.05
Cost-income ratio 82.00 77.58 90.42 106.55
Return on average equity 6.31 5.24 -6.61 -5.43
Tier 1 common capital ratio 15.70 14.87 14.26 13.59
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC Credit Suisse published its figures for the whole of 2016 on 14 February
2017. In order to meet TLAC requirements, CS plans to issue CHF 10-12bn
in senior debt through the HoldCo in 2017. The institution intends to replace
around CHF 21bn of maturing OpCo bonds by TLAC-eligible bonds by 2019.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 20 of 40
Deutsche Bank Deutsche Bank (DB) is the largest credit institution in Germany and is ranked
as a global systemically important bank (G-SIB, additional capital buffer: 2%).
BlackRock is the largest shareholder, with 5.95%. Through its "Strategy 2020"
announced at the end of 2015, the bank is aiming to focus more closely on
the range of products and services and reduce the complexity of the institu-
tion while strengthening the capital base. DB operates in the four re-
structured operating divisions: Global Markets (GM; trading activities for insti-
tutional clients), Corporate & Investment Banking (CIB; support for corporate
clients), Private, Wealth & Commercial Clients (PW&CC) and Deutsche Asset
Management (AM; institutional clients and fund business). DB has set itself a
series of ambitious financial targets for 2018 and 2020: achieving a CET1
ratio of at least 12.5% from December 2018 onwards (currently 11.1%), in-
creasing the leverage ratio to at least 4.5% by December 2018 and to at least
5.0% by December 2020 (currently: 3.5%), lowering the cost-income ratio to
approximately 70% by 2018 and 65% by 2020 (currently: 89.1%), reducing
RWAs to EUR 320bn by 2018 and EUR 310bn by 2020 (currently: EUR
385bn). The strategy also includes cutting around 4,000 jobs in Germany,
closing branches in 2017, exiting some markets and selling stakes in other
companies. In relation to a settlement that was sought in connection with
transactions on the U.S. real estate market (RMBS), the U.S. Department of
Justice initially proposed a settlement amount of USD 14bn. The parties in-
volved were able to reach an agreement in principle in December 2016. Un-
der its terms, Deutsche Bank is required to pay a civil fine of USD 3.1bn and
provide USD 4.1bn for consumer relief in the USA. This relief is to be provid-
ed over a period of at least five years. Im March 2017 DB announced a EUR
8bn rights issue, along with up to EUR 2bn of capital increase via flotation of
a small stake in their Asset Management unit and asset disposals.
Homepage
www.deutsche-bank.de
Ratings
Rating Outlook
Fitch A- *- -
Moody's Baa2 Stable
S&P BBB+ *+ -
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,611,400 1,708,703 1,629,130 1,591,000
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Senior Financials DEUTSCHE BANK AG
Loans to customers 388,678 417,444 444,577 409,000
Customer deposits 413,574 424,584 447,909 N/A
Net interest income 14,834 14,272 15,881 14,707
Earnings before tax 1,457 3,116 -6,097 -810
Net interest margin 0.88 0.96 1.01 N/A
Cost-income ratio 84.73 85.40 97.13 96.61
Return on average equity 1.21 2.62 -9.25 N/A
Tier 1 common capital ratio 12.83 15.15 13.19 13.53
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC The German statutory provisions for "subordination" of all outstanding plain-
vanilla senior bonds compared to other senior liabilities puts DB into the
comfortable starting position of having sufficient TLAC-eligible liabilities. Due
to their maturity profile, DB is nevertheless planning to issue TLAC-eligible
senior bonds with a volume of between EUR 11.0 to 14.0bn in 2017. Approx-
imately EUR 9.0 to 11.0bn is to be raised through structured seniors. The
total funding target is EUR 25.0bn. On 2 February 2017, the figures for the
2016 financial year were published.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 21 of 40
HSBC HSBC was established in 1865 for the purpose of financing trade between
Europe and Asia. It now has more than 234,000 employees worldwide. The
London-based bank is designated as a global systemically important bank
(additional capital buffer: 2%). It offers its approximately 46m customers a
network of more than 4,400 branches in 71 countries. HSBC shares are
listed on the stock markets of London, Hong Kong, New York, Paris and
Bermuda, and are in free float. A share buy-back programme worth USD
2.5bn announced in August 2016 had already been 59% implemented by
Q3 2016. Its business operations are divided into four areas: Global Bank-
ing & Markets, Commercial Banking, Retail Banking and Wealth Manage-
ment as well as Global Private Banking. The group is diversified regionally,
with an earnings focus on Asia. HSBC is currently undergoing a restructur-
ing process, which is scheduled to be completed by the end of 2017. In
addition to a reduction in RWAs by around USD 290bn, it is also expected
to include cost savings of between USD 4.5bn and USD 5bn. Business
operations in Brazil were also discontinued, resulting in an RWA reduction
of USD 39.5bn. Supervisory requirements furthermore stipulate that a UK
ring-fenced bank must be formed by 2018. As at year end 2016 the CET1
ratio (fully loaded) was 13.6% and the leverage ratio was 5.4%.
Homepage
www.hsbc.com
Ratings
Rating Outlook
Fitch AA- Stable
Moody's A1 Negative
S&P A Negative
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,938,843 2,176,062 2,218,570 2,251,962
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Senior Financials HSBC HOLDINGS
Loans to customers 755,036 841,235 878,007 853,144
Customer deposits 1,030,128 1,157,698 1,224,519 1,249,354
Net interest income 26,771 26,166 29,329 26,959
Earnings before tax 16,998 14,084 17,010 6,431
Net interest margin 1.91 1.83 1.82 1.72
Cost-income ratio 59.01 61.61 60.34 62.86
Return on average equity 9.61 7.46 7.57 1.76
Tier 1 common capital ratio 13.64 10.92 11.86 13.60
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Re-search
Funding and TLAC HSBC's funding targets for 2017 are largely the same as those for 2016. In
order to meet TLAC requirements, HSBC Holding is planning to issue
TLAC-eligible bonds with a volume of between USD 25bn and USD 30bn
(gross). Of this amount, about USD 5bn is earmarked for Tier 2 bonds and
around USD 2-3bn will be AT1 instruments. The figures for the whole of
2016 were published on 21 February 2017.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 22 of 40
ING ING Bank (ING) was formed in 1991 through a merger between Nationale-
Nederlanden and the NMB Postbank Group. The ING Groep, which acts as
100% parent of ING Bank, is now the largest financial group in the Nether-
lands. It has a strong European orientation and is classified as a global
systemically important bank (additional capital buffer: 1%). ING Bank is
represented in more than 40 countries, with over 52,000 employees world-
wide serving more than 35m customers. The bank's focus is on the three
market segments: Market Leaders, Challengers and Growth Markets, in
which the relevant products and services of retail and wholesale banking
are offered. While the Benelux countries are regarded as "Leaders" due to
the market position of ING, Germany, Austria, Spain, Italy, France and
Australia are "Challengers". The markets of Poland, Turkey, Romania and
Asia are viewed as "Growth Markets". A strategic alliance with the Bank of
Beijing has been agreed in the Asian market. In 2008 the Dutch state pro-
vided support for the distressed ING Group. This assistance came with a
number of conditions for the ING Group, including the sale of various inter-
national subsidiaries. The state aid was fully repaid in November 2014. In
the course of implementing a strategic realignment, the group withdrew
from the insurance business in April 2016 by selling the NN Group. As part
of the "Accelerating Think Forward" strategy, EUR 800m is earmarked for
investment in the digital transformation between 2016 and 2021.
Homepage
www.ing.com
Ratings
Rating* Outlook
Fitch A+ Stable
Moody's Baa1 Stable
S&P A- Stable
Rating of ING Groep NV
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets #WERT! 992,856 1,005,233 845,081
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Senior Financials ING BANK NV
Loans to customers #WERT! 570,675 766,294 N/A
Customer deposits #WERT! 522,033 703,437 N/A
Net interest income #WERT! 12,304 12,561 N/A
Earnings before tax #WERT! 3,707 6,172 N/A
Net interest margin N/A N/A 1.27 N/A
Cost-income ratio N/A 63.44 55.57 N/A
Return on average equity N/A N/A 8.21 N/A
Tier 1 common capital ratio N/A 13.49 12.94 14.15
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Re-search
Funding and TLAC ING issues TLAC/MREL-eligible capital instruments through the ING
Group (HoldCo). In the coming two to three years the institution is plan-
ning to issue at least EUR 16bn in senior unsecured bonds. On 2 February
2017 the institution presented its figures for the 2016 financial year.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 23 of 40
Nordea Nordea Bank AB (Nordea; head office in Stockholm) is the largest financial
services group in Scandinavia. It is the only Nordic institution among the 30
G-SIBs (additional capital buffer: 1%). Formed in 2000 from a merger of the
Finnish-Swedish banking group Merita Nordbanken and the Danish bank
Unidanmark, the institution serves almost 11 million customers across more
than 600 branches. The e-branches segment is also growing. Nordea's big-
gest shareholder is the Finnish insurance group Sampo plc with 21.3%.
Nordea has significant market shares not only in Sweden, but also in Den-
mark, Finland and Norway. Most of the operating income is also obtained
from these four countries. The universal bank's business is divided into four
segments, after Retail Banking was divided into two areas, Personal Bank-
ing (PeB) and Commercial & Business Banking (CBB), in Q4 2016. PeB
contributed 26% to operating profit (EUR 4,625m) in Q4 2016, CBB 17%,
Wholesale Banking 20% and Wealth Management 28%. Nordea posted
particularly strong growth in mobile banking. Effective 2 January 2017, the
Norwegian, Danish and Finnish banking subsidiary was merged into Nordea
Bank AB. The benefits include increasing the Group's flexibility and leverag-
ing synergies, resulting in cost savings (reduction of duplicated functions).
The merger does not affect the balance sheet figures of Nordea Bank AB.
Business in each of the countries will continue to be conducted through
branches. Comfortable CET1 ratio (Q4 2016: 18.4%) and LCR (159%).
Starting from 19 March 2017, the Swedish supervisory authority requires an
anticyclical capital buffer of 2% (currently: 1.5%).
Homepage
www.nordea.com
Ratings
Rating Outlook
Fitch* AA- Stable
Moody's Aa3 Stable
S&P AA- Negative
Source: Bloomberg, NORD/LB Fixed In-come Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 630,434 669,342 646,868 615,659
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Senior Financials NORDEA BANK AB
Loans to customers 342,451 348,085 340,920 317,689
Customer deposits 200,743 197,254 189,049 174,028
Net interest income 5,525 5,482 4,963 4,727
Earnings before tax 4,116 4,307 4,704 4,625
Net interest margin 0.91 0.89 0.78 0.79
Cost-income ratio 50.75 49.28 46.91 50.09
Return on average equity 11.08 11.45 12.34 12.34
Tier 1 common capital ratio 14.89 15.68 16.45 18.43
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC On 26 January 2017, Nordea published its figures for the whole of 2016.
As Nordea's capital ratio is comfortable, the need for TLAC-eligible bonds
is manageable. Nordea's funding mix is well diversified. It is dominated by
covered bonds (>50%), although international and domestic senior unse-
cured bonds represent a considerable proportion, at around 25%.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 24 of 40
RBS The Royal Bank of Scotland (RBS) was established in 1727 in Edinburgh
and now has around 82,000 employees. It is ranked as a global systemi-
cally important bank. For this reason it must hold an additional capital buff-
er of 1% at present. Its business segments are divided into the three core
areas: Personal & Business Banking, Commercial & Private Banking and
Corporate & Institutional Banking (CIB). During the financial market crisis in
2008, the Group was bailed out by the UK government in the amount of
GBP 45bn, with the result that the state holds more than 70% of the
shares. One of the conditions for the rescue at that time was the scheduled
sale of the subsidiary Williams & Glyn by the end of 2017. However, it is
not possible to comply with this. The aim is for RBS to become an efficient,
low-risk UK-oriented bank. As a consequence, the number of countries in
which RBS operates will be reduced from the current 38 to 13. By downsiz-
ing the IB division and other high-risk holdings, CIB's RWAs will be re-
duced by 60% by 2019, from the level in December 2014. The realignment
of the bank that was decided at the end of 2013 will take several years, up
to 2019. High amounts have had to be raised for penalties and legal costs
in the past few years. At present, it is faced with a fine up to USD 13.0bn
from the FHFA in the USA due to misselling of MBS. In the course of a
stress test by the Bank of England in 2016, the bank failed to meet CET1
requirements, owing to a lack of capitalisation. As a result, it was the only
bank to have to revise its plan to strengthen its capital adequacy in consul-
tation with the supervisory authority.
Homepage
www.rbs.com
Ratings
Rating Outlook
Fitch BBB+ Stable
Moody's Ba1 Positive
S&P BBB- Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016T3
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,235,088 1,353,674 1,106,479 935,382
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Senior Financials ROYAL BK SCOTLND
Loans to customers 529,596 487,157 453,079 412,202
Customer deposits 565,836 504,417 502,481 446,188
Net interest income 10,622 11,489 12,077 10,661
Earnings before tax -10,424 3,280 -3,723 NA
Net interest margin 1.59 1.87 1.99 NA
Cost-income ratio 94.09 88.03 116.23 NA
Return on average equity -12.39 -4.47 -2.02 -9.81
Tier 1 common capital ratio 10.94 11.14 15.51 13.40
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC RBS presented its funding targets on 24 February 2017, together with
publication of the annual results for 2016. In order to meet TLAC/MREL
requirements, the institution intends to issue between GBP 3bn and 5bn in
senior bonds (HoldCo) in 2017. Tier 2 and AT1 instruments are not
planned in 2017.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 25 of 40
Santander Banco Santander S.A. (Santander) has a company history stretching back
almost 160 years. It has been operating under its current name since
2007. The financial group is now one of the largest in the world and is
listed among the global systemically important financial institutions (addi-
tional capital buffer: 1.0%). Santander has 12,391 branches and 124 mil-
lion customers around the world. Its business operations focus on retail
and commercial banking. Santander also operates in the areas of Global
Wholesale, Asset Management, Private Banking and Insurance. The core
markets for Santander's business activities are Spain, Portugal, the UK,
the USA, Poland, Brazil, Mexico, Chile and Argentina, as well as 15 other
European countries in which Santander operates in the form of Santander
Consumer Finance. Overall, 97% of Santander's underlying profit is gener-
ated in these markets. Santander also has significant market share in Uru-
guay, Puerto Rico and in China. The group is organised into individual
autonomous subsidiaries, each managing its capital and liquidity inde-
pendently in accordance with local criteria and regulations, while at the
same time benefiting from the synergies and advantages afforded by
membership of the Santander Group. The largest shareholder is State
Street Corp. with 12.5% as at 17 February 2017. As a target capital ratio,
Santander intends to have a CET1 ratio of >11% by the end of 2018.
Homepage
www.santander.com
Ratings
Rating Outlook
Fitch A- Stable
Moody's A3 Stable
S&P A- Positive
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,115,761 1,266,296 1,340,262 1,339,125
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Senior Financials BANCO SANTANDER
Loans to customers 668,856 734,711 790,848 790,470
Customer deposits 607,836 647,706 683,142 691,111
Net interest income 25,935 29,548 32,812 31,089
Earnings before tax 7,378 10,680 9,547 11,288
Net interest margin 2.28 2.67 2.66 2.52
Cost-income ratio 53.41 50.59 53.90 50.04
Return on average equity 6.48 8.15 7.39 7.46
Tier 1 common capital ratio 11.71 10.97 12.55 12.53
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC The funding plan for 2017 provides for an issuance volume of TLAC-
eligible senior non-preferred bonds amounting to between EUR 12bn and
EUR 14bn. For 2018, the target amount in this asset category is between
EUR 10bn and EUR 12bn. Due to the "multiple point of entry" resolution
strategy, the TLAC requirement is probably applicable to each resolution
unit. As a result, each of the subsidiaries also issue their own bail-in-
eligible bonds (not reflected in the funding volume). On 25 January 2017,
the institution published its figures for the whole of 2016.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 26 of 40
Société Générale The long-established French bank, Société Générale SA, is one of the
largest European financial institutions. As a global systemically important
bank, it must hold an additional capital buffer of 1%. Around 146,000 em-
ployees serve about 31 million customers in 66 countries worldwide. In
addition to the three core areas of business: "French Retail Banking", "In-
ternational Retail Banking and Financial Services" and "Global Banking
and Investor Solutions", the Corporate Centre is another segment which
performs the bank's Treasury function, among other duties. The business
model is well balanced, with the three core areas of business each contrib-
uting around one third to net income. The most important market is the
French home market. The focus of international business is on Russia and
Africa in addition to Central and Eastern Europe. The bank’s operations in
Russia have an exposure at default of EUR 15bn (Q3 2016). Although this
is low, at only around 2% of the entire exposure, these operations are to be
reduced, against a background of the challenging market environment. The
cost-cutting programme has already led to savings of EUR 900m between
2013 and 2015. Cost savings of EUR 450m and EUR 400m have been
announced for 2016 and 2017, respectively. Other key elements of this
programme are the transformation of French retail banking (target: 20%
fewer branches by 2020), efficiency gains (through job cuts, among other
measures), cost sharing (e.g. through Transactis: joint venture with La
Banque Postale in card processing) as well as outsourcing and offshoring
of areas of responsibility (including outsourcing of securities back office).
Homepage
www.societegenerale.com
Ratings
Rating Outlook
Fitch A Stable
Moody's A2 Stable
S&P A Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 1,214,193 1,308,138 1,334,391 1,382,200
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Senior Financials SOCIETE GENERALE
Loans to customers 360,392 370,367 405,252 426,500
Customer deposits 334,172 349,735 379,631 421,000
Net interest income 10,028 9,999 9,306 N/A
Earnings before tax 2,922 4,354 6,109 N/A
Net interest margin 0.86 0.84 0.74 N/A
Cost-income ratio 71.84 68.79 67.36 N/A
Return on average equity 4.43 5.31 7.24 6.84
Tier 1 common capital ratio N/A 10.91 11.42 11.80
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC Due to the solid capitalisation, the need for "non-preferred" seniors is
manageable. As at the end of 2016, the TLAC ratio is already above the
regulatory requirements for 2019. The funding targets were announced on
9 February 2017, together with publication of the annual results for 2016.
In 2017, SocGen is planning about EUR 9bn in primarily TLAC-eligible
bonds, including subordinated debt. EUR 2.1bn of this has already been
issued.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 27 of 40
Standard Chartered Standard Chartered plc is a global systemically important financial institu-
tion (additional capital buffer: 1%) headquartered in London. Formed in
1969 through the merger of Standard Bank of British South Africa and
Chartered Bank of India, Australia and China, it has around 84,000 em-
ployees worldwide. Owing to the bank's history, its core markets are pri-
marily the regions of Asia, Africa and Middle East. Its business operations
cover the segments Corporate & Institutional Banking, Commercial Bank-
ing, Private Banking, Retail Banking and Central & Other Items. In the first
half of 2016, 67% of operating income was generated in the Asian region
and around 20% in the Africa and Middle East regions. With regard to the
segments, around 46% of operating income was accounted for by Corpo-
rate & Institutional Banking, with a further 34% attributable to Retail Bank-
ing. In November 2015 the bank introduced a strategic realignment be-
cause of declining results. Its objective is to strengthen the capitalisation
and restructure the business operations. The aim is a CET1 ratio of 12%-
13% and return on equity of 10% by 2020 after completion of the measures
listed below: restructuring of business areas and portfolios worth USD
100bn (around one third of RWAs), scheduled cost savings of USD 2.9bn,
a simplified organisational structure and a capital increase of around USD
5.1bn. With 15.74% (March 2017) of the shares, the largest shareholder
with is Temasek Holdings (Private) Limited, which is owned by the Singa-
pore government. The results of the stress test conducted by the Bank of
England in 2016 indicate that the minimum requirements for hard core
capital on the part of the bank could not be met, although the existing plan
to strengthen capitalisation is constructive.
Homepage
www.standardchartered.com
Ratings
Rating Outlook
Fitch A+ Stable
Moody's A1 Negative
S&P BBB+ Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 489,465 599,678 589,693 613,193
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Senior Financials STANDARD CHART
Loans to customers 214,848 238,412 240,674 242,641
Customer deposits 283,767 342,162 330,648 358,706
Net interest income 8,404 8,296 8,481 7,048
Earnings before tax 4,568 3,193 -1,373 370
Net interest margin 1.76 1.62 1.42 1.25
Cost-income ratio 53.50 57.82 73.20 74.32
Return on average equity 9.04 5.78 -4.61 -0.39
Tier 1 common capital ratio 11.77 10.54 12.60 13.59
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC On 24 February 2017, Standard Chartered published its annual results for
2016. The Group’s funding structure remains conservative with limited
refinancing requirements over the next few years.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 28 of 40
UBS UBS Group AG is a universal bank with headquarters in Zurich. It is listed
among the global systemically important financial institutions (additional
capital buffer: 1%). With around 60,000 employees worldwide, it provides
services to private and corporate clients as well as institutional clients in 54
countries. It has assets under management of CHF 2,747bn. The biggest
shareholders in the UBS Group are Chase Nominees Ltd. (9.24%), DTC
(Cede & Co [6.62%]) and GIC Private Limited (6.38%). Its business opera-
tions are divided into five divisions: Wealth Management, Wealth Man-
agement Americas, Investment Bank, Personal & Corporate Banking and
Asset Management. The Group is in a process of reorganization, due part-
ly to changes in the regulatory framework. This involved the formation of
UBS Group AG as a holding company in order to improve the resolvability
of the UBS Group. Transfer of the Swiss areas Retail & Corporate and
parts of Wealth Management into UBS Switzerland AG was also success-
fully completed. An intermediate holding company was established in Q3
2015 in order to comply with the Dodd-Frank Act. This company combines
the U.S. subsidiaries apart from the U.S. branches of UBS AG. UBS Asset
Management AG was also formed, into which the operational AM subsidi-
aries were transferred in 2016. The Group reorganisation is having a posi-
tive effect on the Group's resolvability. UBS AG is a wholly owned subsidi-
ary of UBS Group AG. UBS is aiming to cut costs by CHF 2.1bn by the end
of 2017 and record a Basel III CET1 ratio (fully loaded) of >13% (Q4 2016:
13.8%).
Homepage
www.ubs.com
Ratings
Rating Outlook
Fitch A Positive
Moody's Ba1 (hyp) -
S&P A- Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 827,047 883,722 866,926 872,449
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Senior Financials UBS AG LONDON
Loans to customers 236,241 264,047 290,510 285,827
Customer deposits 318,971 341,192 358,777 395,322
Net interest income 4,702 5,397 6,308 5,885
Earnings before tax 2,659 2,026 5,143 3,847
Net interest margin 0.53 0.68 0.71 0.71
Cost-income ratio 87.30 87.81 81.65 85.46
Return on average equity 6.82 7.02 11.57 6.15
Tier 1 common capital ratio 18.45 19.41 19.02 16.76
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Research
Funding and TLAC On 27 January, UBS published its annual results for 2016. The bank has
CHF 18.2bn in TLAC-eligible bonds outstanding as at year-end 2016.
Long-term bonds that are not TLAC-eligible are to be exchanged through
the issue of TLAC-eligible bonds (HoldCo) by 2020.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 29 of 40
UniCredit UniCredit S.p.A. is the largest banking group and the only global systemi-
cally important institution in Italy (additional capital buffer: 1%). The biggest
shareholders are Capital Research and Management Company with
around 6.7%, Aabar Luxembourg S.A.R.L with about 5% and Blackrock
with roughly 4.8%. Even though the bank has operations in a total of 17
countries, the focus is especially on the Italian home market and Germany,
Austria, Poland and CEE. Organisationally, UniCredit is divided into Com-
mercial Banking, Corporate Investment Banking, Asset Management and
Asset Gathering. Within the framework of its "Transform 2019" strategy,
the bank is seeking primarily to strengthen its capitalisation. A capital in-
crease in the amount of EUR 13.0bn was approved by the General Meet-
ing in January 2017. A reverse split of UniCredit shares was approved at
the same time. In addition, the bank intends to press ahead with its de-
risking by selling NPL in the amount of EUR 17.7bn by mid-2017. As addi-
tional measures to boost efficiency, UniCredit is planning to cut 14,000
jobs by 2019, accompanied by savings of EUR 1.1bn. In addition, the cost-
income ratio is expected to fall below 52% by 2019. This is offset by in-
vestments of EUR 1.6bn in IT and digitalisation projects. In addition to the
sale of shares in Bank Pekao S.A. (around EUR 2.4bn) and shares in
Fineco Bank (around EUR 550m), in December UniCredit also sold its
asset management subsidiary, Pioneer Investments, for more than EUR
3.5bn to the French asset manager Amundi, in order to increase the CET1
ratio. The target is a CET1 ratio (fully loaded) of >12.5% by 2019.
Homepage
www.unicreditgroup.eu
Ratings
Rating Outlook
Fitch BBB+ Negative
Moody's Baa1 Stable
S&P BBB- Stable
Source: Bloomberg, NORD/LB Fixed Income Research
Financial data (EUR m) 2013Y 2014Y 2015Y 2016Y
EUR Senior Bonds vs. iBoxx € Financials Senior
Total assets 825,919 844,217 860,433 859,533
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Senior Financials UNICREDIT SPA
Loans to customers 490,811 480,393 485,680 444,607
Customer deposits 401,474 418,861 464,627 452,419
Net interest income 11,918 12,062 11,658 N/A
Earnings before tax -15,318 3,679 2,396 N/A
Net interest margin 1.46 1.53 1.41 N/A
Cost-income ratio 75.47 64.88 71.72 N/A
Return on average equity -21.37 4.56 3.80 -21.50
Tier 1 common capital ratio 10.57 10.26 10.59 11.49
Source: SNL, NORD/LB Fixed Income Research Criteria: outstanding volume: ≥ EUR 500m; fixed coupon; EUR, bullet; source: Bloomberg, Markit, NORD/LB Fixed Income Re-search
Funding and TLAC UniCredit published its annual results for 2016 on 9 February 2017; it
posted a loss of EUR 11.79bn. Once the capital increase of EUR 13bn has
been implemented, the CET1 ratio is expected to rise to 11.15% again on
a pro forma basis. In order to meet TLAC requirements, the institution is
planning to issue EUR 20bn in senior bonds (funding plan 2016 to 2018).
In addition, amounts of EUR 6.5bn in Tier 2 and EUR 3.5bn in AT1 instru-
ments are also scheduled to be placed over the same period.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 30 of 40
Glossary
Basics
Basel III
Following Basel I and II, Basel III is the latest version of the Basel capital and
liquidity recommendations; Basel III is currently being revised ("Basel IV")
BCBS (Basel Committee on
Banking Supervision)
Committee headquartered in Basel which makes recommendations for the
capital adequacy and liquidity of banks (recommendations apply to the global
systemically important banks, the European Commission implements the
recommendations for EU banks)
CRD IV (Capital
Requirements Directive IV)
EU directive; CRD IV and CRR are collectively the European implementation
of the Basel III recommendations, binding on all EU banks; transposition into
the national law of each country necessary
CRR (Capital Requirements
Regulation)
EU regulation; CRD IV and CRR are collectively the European implementa-
tion of the Basel III recommendations and are therefore binding for all EU
banks; once adopted by the European Commission, the CRR is legally bind-
ing in all EU countries, without further steps being required; it defines three
equity capital aggregates: hard core capital (CET1), additional core capital
(AT1) and supplementary capital (Tier 2)
CRR institution All EU banks that are subject to CRD IV and CRR
EBA (European Banking
Authority)
European supervisory authority for banks. Its main responsibilities include
the setting of standards for EU banking supervision, the development of a
manual which sets out harmonised supervisory practices and the execution
of stress tests; in addition to EIOPA (European Insurance and Occupational
Pensions Authority) and ESMA (European Securities and Markets Authority),
it is one of the three European Supervisory Authorities (ESAs)
ESFS (European System of
Financial Supervision)
European system of financial supervision, consisting of three supervisory
authorities: the European Securities and Markets Authority (ESMA), the Eu-
ropean Banking Authority (EBA) and the European Insurance and Occupa-
tional Pensions Authority (EIOPA)
FSB (Financial Stability
Board)
Financial Stability Board; support and coordination of supervisory and regula-
tory activities of international financial markets through recommendations
G-SIB (Global Systemically
Important Bank)
Global systemically important bank (FSB and Basel terminology); the FSB
currently lists 30 banks as global systemically important banks; list updated
in November each year
G-SIFI (Global Systemically
Important Financial
Institution)
Global systemically important financial institution (CRD IV terminology)
"too big to fail" (TBTF) Principle under which major banks are regarded as so important for the fi-
nancial system that they are rescued with taxpayers' money if they face fail-
ure, in order to prevent insolvency and a potential systemic crisis in its wake
(problem of moral hazard)
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 31 of 40
Capital
CET1
(Common Equity Tier 1)
Hard core capital; consisting of subscribed equity capital and retained earn-
ings; Basel III/CRD IV requires a hard core capital ratio of at least 4.5% of
the risk-weighted assets, plus various capital buffers
AT1
(Additional Tier 1 Capital)
Additional core capital; under Basel III/CRD IV, CET1 and AT1 must be at
least 6%; AT1 instruments may participate in losses through cancellation of
interest payments or conversion into equity capital
Tier 2 Capital Supplementary capital; primarily in the form of subordinate bonds; old
instruments such as preference shares and participation certificates are also
counted as supplementary capital
Grandfathering Counting old capital instruments, now no longer permitted, towards the capi-
tal ratios in the transitional phase of Basel III (up to 2019)
CoCo Bond (Contingent
Convertible Bond)
Mandatory convertible bonds which, should a capital ratio fall below a certain
level (under Basel III at least 5.125%), are converted into hard equity capital
(into shares) or absorb losses directly (write-off of the claim to repayment)
ADI (Available Distributable
Amount)
Available distributable funds; consisting of earnings plus profit reserves; now
usually called MDA (Maximum Distributable Amount)
MDA (Maximum Distributable
Amount)
Available distributable funds; consisting of earnings plus profit reserves; also
called ADI
CCB (Capital Conservation
Buffer)
Capital conservation buffer; buffer of 2.5% of RWA in CET1 capital; it may
fall below this level in times of crisis
CCyB (Countercyclical
Capital Buffer)
Countercyclical capital buffer in CET1 capital defined by the national super-
visory body; may be between 0% and 2.5%
G-SIB Buffer Additional CET1 capital buffer for G-SIBs between 1% and 2.5%
SREP (Supervisory Review
and Evaluation Process)
ECB's review and evaluation process as banking supervisor
SREP ratios CET1 ratio, which is defined for each individual bank by the supervisory body
within the scope of Pillar 2 of the Basel Accord; disclosure by the banks
since the start of 2016
Leverage ratio Debt ratio introduced by Basel III, sets the capital of a bank in relation to its
total assets. European Commission draft provides for a binding leverage
ratio of 3%.
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 32 of 40
Liquidity
LCR
(Liquidity Coverage Ratio)
Liquidity coverage metric introduced by Basel III to measure a bank's liquidity
holdings to cover short-term obligations; the LCR standard is designed to
ensure that every bank is able to independently withstand a stress scenario
over a period of 30 calendar days; it is defined as the ratio of the stock of
highly liquid assets to total net cash outflows after 30 days; the minimum
value is 100%, although banks will be permitted to fall below this level tem-
porarily in order to overcome an acute period of stress
NSFR
(Net Stable Funding Ratio)
Structural liquidity ratio introduced by Basel III which aims to optimise the
structural liquidity of credit institutions over a timeframe of one year; it is de-
fined as the ratio of the available stable funding to required stable funding
Bail-in
Bail-in Participation of bond creditors and depositors in losses incurred by a bank if
it is restructured; the purpose of participating in the loss is especially the
recapitalisation of a bridging bank or residual bank
Bail-in-eligible finance
resources
Bonds and other top-ranking liabilities which, if a bank is restructured, may
have to participate in losses in line with the hierarchy of liability (covered
bonds, for example, are excluded)
BRRD (Bank Recovery &
Resolution Directive)
EU Directive on the resolution and recovery of banks; must be transposed
into national law by EU countries, e.g. in Germany the Act on the Recovery
and Resolution of Credit Institutions (Sanierungs- und Abwicklungsgesetz,
SAG)
Banking Union (BU) Single rulebook consisting of a package of legal acts that is binding for all EU
banks; these rules include capital adequacy requirements for banks, tighter
investor protection provisions and measures to prevent and resolve bank
insolvencies; the three pillars of the BU are: Single Supervisory Mechanism
(SSM), Single Resolution Mechanism (SRM), Single Deposit Guarantee
Scheme
SSM (Single Supervisory
Mechanism)
Single supervisory mechanism which transfers to the ECB the role of central
supervisory body for financial institutions in the eurozone and in any non-
eurozone state that voluntarily opts in to the SSM; the ECB directly supervis-
es the major banks, while the national competent authorities continue to su-
pervise the other banks: part of the Banking Union
SRB (Single Resolution
Board)
Committee for the centralised resolution of banks; applies to banks super-
vised by the SSM; part of the Banking Union
SRF (Single Resolution Fund) Centralised resolution fund that is financed by the banks (bank levy); part of
the Banking Union
SRM (Single Resolution
Mechanism)
Centralised mechanism for bank resolution; consists of the
Single Resolution Board (SRB) and the Single Resolution Fund (SRF)
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 33 of 40
"going concern" A bank continues its business operations, it is not liquidated
"gone concern" A bank does not continue its business operations as usual, it is liquidated or
restructured
"no creditor worse off" Principle that, in the event that a bank is restructured, no creditor may be put
in a worse position than in the case of insolvency (liquidation)
Point of non-viability Status in which the survival of the bank is no longer possible without state
support; restructuring with participation in losses may be ordered by the su-
pervisory body
SPE (Single Point of Entry) Strategy in which the resolution applies to the highest unit in the group (hold-
ing company; HoldCo); participation in losses begins with liabilities of the
holding company
MPE (Multiple Point of Entry) Strategy in which the resolution applies to the operating units in the group
(operating companies; OpCo); participation in losses begins with liabilities of
the units to be restructured
Ring-fencing Process for the "insolvency-proof" shielding of assets
TLAC / MREL
TLAC (Total Loss-Absorbing
Capacity)
Loss-bearing capital which a bank must hold as a minimum; consisting of the
liable equity and certain senior liabilities; these instruments must be able to
absorb losses with legal certainty in the event of insolvency or in the course
of resolution before other liabilities can be used for covering the loss; the
FSB determines the minimum volume, to be held solely by G-SIB; for this
purpose, G-SIB must comply with two ratios – one risk-weighted and one
unweighted
TLAC-eligible bonds The FSB provides three options for the legally sound participation of TLAC
instruments in losses: contractual, statutory and structural subordination
Contractual Subordination Legally sound participation in losses through contractual subordination: the
security terms and conditions of the TLAC instruments include contractual
provisions stipulating the relevant subordination
Statutory Subordination Legally sound participation in losses through statutory subordination; an
appropriate statutory provision stipulates the subordination of the TLAC in-
struments to all other liabilities of the resolution unit
Structural Subordination Legally sound participation in losses through structural subordination: the
liabilities side of the resolution unit consists solely of TLAC instruments (e.g.
in the case of a holding company)
HoldCo (Holding Company) Top-level holding company, generally without any operating business
OpCo (Operating Company) Operating units which carry out the banking business
MREL (Minimum
Requirement for Own Funds
and Eligible Liabilities)
Minimum requirements for bail-in-eligible finance resources; compliance
required by all EU banks; the MREL ratio is set by the supervisory authority
for each bank on an individual basis
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 34 of 40
German Act on the Recovery
and Resolution of Credit In-
stitutions (Gesetz zur
Sanierung und Abwicklung
von Kreditinstituten; SAG)
Statutory implementation of the BRRD in Germany
German Resolution
Mechanism Act
(Abwicklungsmechanismus-
gesetz; AbwMechG)
The AbwMechG adapts German bank resolution law (through amendments
to the SAG and the Insolvency Act (Insolvenzordnung), etc.) to comply with
the EU's single resolution mechanisms and the European provisions on the
bank levy; among other provisions, the Act regulates the transfer of bank
levies collected in Germany to the European resolution fund as well as the
hierarchy of liability applicable in the event of restructuring
Hierarchy of liability The order of liability for creditors/participation in losses in the event of re-
structuring; the BRRD defines the basic structure of the hierarchy of liability,
deviation from provisions stipulated by national legislation may occur
Hierarchy of liability in
Germany
Unlike the BRRD, the AbwMechG and SAG subordinate top-ranking liabilities
(unstructured senior unsecured bonds, Schuldscheindarlehen [SSD]) to other
top-ranking liabilities (structured bonds, deposits by institutional investors,
unsecured deposits by private investors)
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 35 of 40
Appendix Contacts
Fixed Income Research
Michael Schulz Head +49 511 361-5309 [email protected]
Kai Ebeling Covered Bonds +49 511 361-9713 [email protected]
Mario Gruppe Public Issuers +49 511 361-9787 [email protected]
Michaela Hessmert Banks +49 511 361-6915 [email protected]
Melanie Kiene Banks +49 511 361-4108 [email protected]
Jörg Kuypers Corporates / Retail Products +49 511 361-9552 [email protected]
Matthias Melms Covered Bonds +49 511 361-5427 [email protected]
Sascha Remus Corporates / Retail Products +49 511 361-2722 [email protected]
Norman Rudschuck Public Issuers +49 511 361-6627 [email protected]
Thomas Scholz Corporates / Retail Products +49 511 361-4710 [email protected]
Martin Strohmeier Corporates / Retail Products +49 511 361-4712 [email protected]
Kai Witt Corporates / Retail Products +49 511 361-4639 [email protected]
Markets Sales
Carsten Demmler Head +49 511 361-5587 [email protected]
Institutional Sales (+49 511 9818-9440)
Thorsten Bock [email protected] Gabriele Schneider [email protected]
Uwe Kollster [email protected] Dirk Scholden [email protected]
Rainer Nabel [email protected] Uwe Tacke [email protected]
Daniel Novotny-Farkas [email protected]
Sales Savings Banks / Regional Banks (+49 511 9818-9400)
Christian Schneider (Head) [email protected] Martin Koch [email protected]
Thorsten Aberle [email protected] Stefan Krilcic [email protected]
Oliver Bickel [email protected] Bernd Lehmann [email protected]
Tobias Bohr [email protected] Jörn Meißner [email protected]
Kai-Ulrich Dörries [email protected] Lutz Schimanski [email protected]
Jan Dröge [email protected] Ralf Schirrling [email protected]
Sascha Goetz [email protected] Brian Zander [email protected]
Sales Asia (+65 64 203136)
Jefferson Ko [email protected] Muhammad Peter Shep-herd
Fixed Income / Structured Products Sales Europe (+352 452211-515)
René Rindert (Head) [email protected] Patricia Lamas [email protected]
Morgan Kermel [email protected] Laurence Payet [email protected]
Corporate Sales
Shipping / Aircraft +49 511 9818-8150 Corporate Clients +49 511 9818-4003
Real Estate / Structured Finance
+49 511 9818-8150 FX/MM
+49 511 9818-4006
Syndicate / DCM (+49 511 9818-6600)
Thomas Cohrs (Head) [email protected] Julien Marchand [email protected]
Axel Hinzmann [email protected] Wlada Pesotska [email protected]
Thomas Höfermann [email protected] Andreas Raimchen [email protected]
Tobias Jesswein [email protected] Udo A. Schacht [email protected]
Markus Klingbeil [email protected] Marco da Silva [email protected]
Alexander Malitsky [email protected]
Financial Markets Trading
Corporates +49 511 9818-9690 Collat. Mgmt / Repos +49 511 9818-9200
Covereds / SSAs +49 511 9818-8040 Cust. Exec. & Trading +49 511 9818-9480
Financials +49 511 9818-9490 Frequent Issuers +49 511 9818-9640
Governments +49 511 9818-9660 Structured Products +49 511 9818-9670
Länder & Regions +49 511 9818-9550
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 36 of 40
Disclaimer
This investment recommendation/investment strategy recommendation (hereinafter the „Investment Recommendation”) was drawn up
by NORDDEUTSCHE LANDESBANK GIROZENTRALE („NORD/LB“), The supervisory authorities in charge of NORD/LB are the Euro-
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This Investment Recommendation is addressed exclusively to recipients which are professional and institutional clients in Germany, the
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In particular, neither this Investment Recommendation nor any copy thereof must be forwarded or transmitted to the United States of
America or its territories or possessions or distributed to any employees or affiliates of Recipients resident in these jurisdictions,
This Investment Recommendation was drawn up in compliance with the applicable provisions of the German Securities Trading Act
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This Investment Recommendation and the information contained herein have been compiled and are provided exclusively for information
purposes, This Investment Recommendation is not intended as an investment incentive, It is provided for the Recipient’s personal infor-
mation, subject to the express understanding, which is acknowledged by the Recipient, that it does not constitute any direct or indirect
offer, individual recommendation, solicitation to purchase, hold or sell or to subscribe for or acquire any securities or other financial
instruments nor any measure by which financial instruments might be offered or sold,
All actual details, information and statements contained herein were derived from sources considered reliable by NORD/LB, However,
since these sources are not verified independently, NORD/LB cannot give any assurance as to or assume responsibility for the accuracy
and completeness of the information contained herein, The opinions and prognoses given herein on the basis of these sources consti-
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developments described herein, Neither NORD/LB nor its governing bodies or employees can give any assurance as to or assume any
responsibility or liability for the accuracy, adequacy and completeness of this Investment Recommendation or any loss of return, any
indirect, consequential or other damage which may be suffered by persons relying on the information or any statements or opinions set
forth in this Investment Recommendation (irrespective of whether such losses are incurred due to any negligence on the part of these
persons or otherwise),
Past performances are not a reliable indicator of future performances, Exchange rates, price fluctuations of the financial instruments and
similar factors may have a Negativee impact on the value and price of and return on the financial instruments referred to herein or any
instruments linked thereto, An evaluation made on the basis of the historical performance of any security does not necessarily give an
indication of its future performance,
This Investment Recommendation neither constitutes any investment, legal, accounting or tax advice nor any representation that an
investment or strategy is suitable or appropriate in the light a Recipient’s individual circumstances, and nothing in this Investment Rec-
ommendation constitutes a personal recommendation to the Recipient thereof, The securities or other financial instruments referred to
herein may not be suitable for the Recipient’s personal investment strategies and objectives, financial situation or individual needs,
Also this Investment Recommendation as a whole or any part thereof is not a sales or other prospectus, Correspondingly, the infor-
mation contained herein merely constitutes an overview and does not form the basis for an investor‘s potential decision to buy or sell, A
full description of the details relating to the financial instruments or transactions which may relate to the subject matter of this Investment
Recommendation is set forth in the relevant (financing) documentation, To the extent that the financial instruments described herein are
NORD/LB’s own issues and subject to the requirement to publish a prospectus, the conditions of issue applicable to any individual finan-
cial instrument and the relevant prospectus published with respect thereto as well NORD/LB’s relevant registration form, all of which are
available for downloading at www,nordlb,de and may be obtained, free of charge, from NORD/LB, Georgsplatz 1, 30159 Hanover, shall
be solely binding, Any potential investment decision should at any rate be made exclusively on the basis of such (financing) documenta-
tion, This Investment Recommendation cannot replace personal advice, Before making an investment decision, each Recipient should
consult an independent investment adviser for individual investment advice with respect to the appropriateness of an investment in
financial instruments or investment strategies as contemplated herein as well as for other and more recent information on certain in-
vestment opportunities,
Each of the financial instruments referred to herein may involve substantial risks, including capital, interest, index, currency and credit
risks, political, fair value, commodity and market risks, The financial instruments could experience a sudden substantial deterioration in
value, including a total loss of the capital invested, Each transaction should only be entered into on the basis of the relevant investor’s
assessment of its individual financial situation as well as of the suitability and risks of the investment,
NORD/LB and its affiliates may, for their own account or for the account of third parties, participate in transactions involving the financial
instruments described herein or any underlying assets, issue further financial instruments having terms that are the same as or similar to
those governing the financial instruments referred to herein as well as enter into transactions to hedge positions, Such actions may affect
the price of the financial instruments described in this Investment Recommendation,
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 37 of 40
To the extent the financial instruments referred to herein are derivatives, they may involve an initial Negativee market value from the
customer’s point of view, depending on the terms and conditions prevailing as of the transaction date, Furthermore, NORD/LB reserves
the right to pass on its economic risk from any derivative transaction it has entered into to third parties in the market by way of a mirror
image counter-transaction,
Further information on any fees which may be included in the sales price is set forth in the brochure „Customer Information Relating to
Securities Transactions“ which is available at www,nordlb,de,The information set forth in this Investment Recommendation shall super-
sede all previous versions of any relevant Investment Recommendation and refer exclusively to the date as of which this Investment
Recommendation has been drawn up, Any future versions of this Investment Recommendation shall supersede this present version,
NORD/LB shall not be under any obligation to update and/or review this Investment Recommendation at regular intervals, Therefore, no
assurance can be given as to its currentness and continued accuracy,
By making use of this Investment Recommendation, the Recipient shall accept the foregoing terms and conditions,
NORD/LB is a member of the protection scheme of Deutsche Sparkassen-Finanzgruppe, Further information for the Recipient is set
forth in clause 28 of the General Terms and Conditions of NORD/LB or at www,dsgv,de/sicherungssystem,
Additional information for recipients in the UK
NORD/LB subject to limited regulation by the Financial Conduct Authority (“FCA”) und Prudential Regulation Authority (“PRA”), Details
about the extent of our regulation by the FCA and PRA are available from NORD/LB on request,
This Investment Recommendation is a financial promotion, Relevant Persons in the UK should contact NORD/LB’s London Branch,
Investment Banking Department, Telephone: 0044 / 2079725400 with any queries,
Investing in financial instruments referred to in this Investment Recommendation may expose an investor to a significant risk of losing all
of the amount invested,
Additional information for recipients in France
NORD/LB is partially regulated by the Autorité des Marchés Financiers for the conduct of French business, Details about the extent of
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This Investment Recommendation constitutes investment research within the meaning of Article 24(1) Directive 2006/73/EC, Article
L,544-1 and R,621-30-1 of the French Monetary and Financial Code and does qualify as research recommendation under Directive
2003/6/EC and Directive 2003/125/EC,
Additional information for recipients in Austria
None of the information contained in this Investment Recommendation constitutes a solicitation or offer by NORD/LB or its affiliates to
buy or sell any securities, futures, options or other financial instruments or to participate in any other strategy, Only the published pro-
spectus pursuant to the Austrian Capital Market Act should be the basis for any investment decision of the Recipient,
For regulatory reasons, products mentioned in this Investment Recommendation may not being offered into Austria and are not available
to investors in Austria, Therefore, NORD/LB might not be able to sell or issue these products, nor shall it accept any request to sell or
issues these products, to investors located in Austria or to intermediaries acting on behalf of any such investors,
Additional information for recipients in Belgium
Evaluations of individual financial instruments on the basis of past performance are not necessarily indicative of future results, It should
be noted that the reported figures relate to past years,
Additional information for recipients in Cyprus
This Investment Recommendation constitutes investment research within the meaning of the definition section of the Cyprus Directive
D1444-2007-01(No 426/07), Furthermore, this material is provided for informational and advertising purposes only and does not consti-
tute an invitation or offer to sell or buy or subscribe any investment product,
Additional information for recipients in Denmark
This Investment Recommendation does not constitute a prospectus under Danish securities law and consequently is not required to be
nor has been filed with or approved by the Danish Financial Supervisory Authority as this Investment Recommendation either (i) has not
been prepared in the context of a public offering of securities in Denmark or the admission of securities to trading on a regulated market
within the meaning of the Danish Securities Trading Act or any executive orders issued pursuant thereto, or (ii) has been prepared in the
context of a public offering of securities in Denmark or the admission of securities to trading on a regulated market in reliance on one or
more of the exemptions from the requirement to prepare and publish a prospectus in the Danish Securities Trading Act or any executive
orders issued pursuant thereto,
Additional information for recipients in Greece
The information contained herein describes the view of the author at the time of its publication and it must not be used by its Recipient
unless having first confirmed that it remains accurate and up to date at the time of its use,
Past performance, simulations or forecasts are therefore not a reliable indicator of future results, Mutual funds have no guaranteed
performance and past returns do not guarantee future performance,
Additional information for recipients in Ireland
This Investment Recommendation has not been prepared in accordance with Directive 2003/71/EC, as amended, on prospectuses (the
“Prospectus Directive”) or any measures made under the Prospectus Directive or the laws of any Member State or EEA treaty adherent
state that implement the Prospectus Directive or those measures and therefore may not contain all the information required where a
document is prepared pursuant to the Prospectus Directive or those laws,
Additional information for recipients in Luxembourg
Under no circumstances shall this Investment recommendation constitute an offer to sell, or issue or the solicitation of an offer to buy or
subscribe for Products or Services in Luxembourg,
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 38 of 40
Additional information for recipients in Netherlands
The value of your investments may fluctuate, Results achieved in the past do not offer any guarantee for the future (De waarde van uw
belegging kan fluctueren, In het verleden behaalde resultaten bieden geen garantie voor de toekomst),
Additional information for recipients in Poland
This Investment Recommendation does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of
Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers thereof dated 19 October
2005,
Additional information for recipients in Portugal
This Investment Recommendation is intended only for institutional clients and may not be (i) used by, (ii) copied by any means or (iii)
distributed to any other kind of investor, in particular not to retail clients, This Investment Recommendation does not constitute or form
part of an offer to buy or sell any of the securities covered by the report nor can be understood as a request to buy or sell securities
where that practise may be deemed unlawful, This Investment Recommendation is based on information obtained from sources which
we believe to be reliable, but is not guaranteed as to accuracy or completeness, Unless otherwise stated, all views herein contained are
solely expression of our research and analysis and subject to change without notice,
Additional information for recipients in Sweden
This Investment Recommendation does not constitute or form part of, and should not be construed as a prospectus or offering memo-
randum or an offer or invitation to acquire, sell, subscribe for or otherwise trade in shares, subscription rights or other securities nor shall
it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever, This Investment Recom-
mendation has not been approved by any regulatory authority, Any offer of securities will only be made pursuant to an applicable pro-
spectus exemption under EC Prospectus Directive, and no offer of securities is being directed to any person or investor in any jurisdic-
tion where such action is wholly or partially subject to legal restrictions or where such action would require additional prospectuses, other
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Additional information for recipients in Switzerland
This Investment Recommendation has not been approved by the Federal Banking Commission (merged into the Swiss Financial Market
Supervisory Authority “FINMA” on 1 January 2009),
NORD/LB will comply with the Directives of the Swiss Bankers Association on the Independence of Financial Research, as amended,
This Investment Recommendation does not constitute an issuing prospectus pursuant to article 652a or article 1156 of the Swiss Code
of Obligations, This Investment Recommendation is published solely for the purpose of information on the products mentioned in this
advertisement, The products do not qualify as units of a collective investment scheme pursuant to the Federal Act on Collective Invest-
ment Schemes (CISA) and are therefore not subject to the supervision by the Swiss Financial Market Supervisory Authority (FINMA),
Additional information for recipients in Canada
This Investment Recommendation has been prepared for informational purposes only in relation to the products contained in this materi-
al and is not, under any circumstances to be construed as an offering memorandum or as an offering of any securities for sale directly or
indirectly in any province or territory of Canada,
No securities commission or similar regulatory authority in Canada has passed on the merits of these securities nor has it reviewed this
material and any representation to the contrary is an offence,
Relevant selling restrictions, if any, are contained in the prospectus or other documentation for the respective product,
Additional information for recipients in Estonia
It is advisable to examine all the terms and conditions of the services provided by NORD/LB, If necessary, Recipient of this Investment
Recommendation should consult with an expert,
Additional information for recipients in Finland
The financial products described in this Investment Recommendation may not be offered or sold, directly or indirectly, to any resident of
the Republic of Finland or in the Republic of Finland, except pursuant to applicable Finnish laws and regulations, Specifically, in the case
of shares, those shares may not be offered or sold, directly or indirectly, to the public in the Republic of Finland as defined in the Finnish
Securities Market Act (746/2012, as amended), The value of investments may go up or down, There is no guarantee to get back the
invested amount, Past performance is no guarantee of future results,
Additional information for recipients in Czech Republic
There is no guarantee to get back the invested amount, Past performance is no guarantee of future results, The value of investments
could go up and down
The information contained in this Investment Recommendation is provided on a non-reliance basis and its author does not accept any
responsibility for its content in terms of correctness, accuracy or otherwise,
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 39 of 40
Arrangements for the confidential treatment of sensitive customer and business data as well as for avoiding and handling conflicts of
interest
NORD/LB has separated its business divisions that may have access to sensitive customer and business data (confidential areas) from
its other divisions (e,g, NORD/LB Research) in terms of functions and locations and/or via relevant data processing arrangements,
The disclosure of confidential information that may have an impact on the prices of securities is monitored by NORD/LB’s Compliance
Unit which is independent of its trading, operational and settlement divisions, This independent unit controls the transactions undertaken
by NORD/LB and its employees on a daily basis to ensure that they are in line with market conditions, The Compliance Unit may impose
such trading bans and restrictions as may be necessary to ensure that information, which may affect the prices of securities, is not mis-
used and to prevent confidential information from being disclosed to divisions that are only allowed to use information available to the
general public, To avoid conflicts of interest in connection with the preparation of financial analyses, the analysts of NORD/LB are
obliged to inform the Compliance Unit of any studies being drawn up and must not invest in the financial instruments handled by them,
They are obliged to notify the Compliance Unit of all transactions (including external transactions) undertaken by them for their own
account or for the account or on behalf of third parties, Thus the Compliance Unit is in a position to identify all unauthorized transactions
undertaken by the analysts, such as insider trading and front and parallel running, When a Investment Recommendation involving con-
flicts of interest to be disclosed within the NORD/LB Group is drawn up, any information on such conflicts of interest will only be made
available by the Compliance Unit upon completion of the Investment Recommendation, Any subsequent amendment of the relevant
Investment Recommendation may only be made upon consultation with the Compliance Unit and when it has been ensured that the
results of the study are not affected by the knowledge of such conflicts of interest, Further information on these matters is set forth in our
Investment Recommendation or Conflict of Interest Policy which is available from the Compliance Unit of NORD/LB upon request,
Time of going to press
24 February 2017 11:00 CET
Disclosure of NORD/LB’s potential conflicts of interest according to § 34b Abs, 1 WpHG and
Article 5 and 6 according to the Commission Delegated Regulation (EU) 2016/958 of 9 March 2016
NORD/LB or one of its affiliated companies is a market maker or liquidity provider in the financal instrument of the issuer Banco Santan-der, BNP Paribas, ING Groep, Société Générale, UniCredit SPA.
NORD/LB or one of its affiliated companies was a co-lead manager of a consortium, which took over the last of the issues of securities placed by BNP Paribas, Crédit Agricole, Credit Suisse, Deutsche Bank in the past 12 months.
Additional disclosures
Sources and price indications
Depending on the issuer, we use information from financial data suppliers, our own estimates, company data and the public media for the
preparation of our Investment Recommendations, Unless otherwise stated in the report, prices indicated relate to the closing price on the
previous day, Fees and commissions apply to securities (buy, sell, hold) and these may reduce the yield on investments,
Analytical methods and updates
In the preparation of Investment Recommendations, we take company-specific methods used for fundamental securities’ analysis and
quantitative/statistical methods, as well as technical analytical methods as the basis for valuations and for the regular updates, All as-
sumptions and analytical derivations related to our recommendation may be extracted from the underlying research analysis, It should be
noted that the results of analyses provide a snapshot overview and that past developments do not constitute a reliable indicator for future
profits, The basis of the valuations is subject to unforeseen change at any time, potentially leading to different conclusions, The present
report is prepared on an irregular basis, Recipients are not automatically entitled to receive report update publications, Detailed infor-
mation with respect to our rating methodology is available at the webpage www,nordlb-pib,de/Bewertungsverfahren,
Recommendation system Share of recommendation (12 months)
Positive: Positive expectations for the issuer, a security type or a specif-
ic security of an issuer,
Neutral: Neutral expectations for the issuer, a security type or a specif-
ic security of an issuer,
Negative: Negative expectations for the issuer, a security type or a
specific security of an issuer,
Relative value (RV): Relative value recommendation in comparison to
a market segment, an issuer or a maturity,
Positive: 44%
Neutral: 52%
Negative: 4%
Financial Special 24 February 2017
NORD/LB Fixed Income Research
page 40 of 40
Recommendation history (12 months)
An overview of all our bond recommendations during the last 12 months is available at the webpage www,nordlb-pib,de/empfehlungsuebersicht_renten, Corresponding password: "renten/Liste3",
Issuer / security Date Recommendation Bond type Cause
Barclays Bank PLC 20.02.2017 neutral Financials Fundamental
Barclays Bank PLC 04.11.2016 neutral Financials Fundamental
Barclays Bank PLC 01.04.2016 neutral Financials Fundamental
BNP Paribas 20.02.2017 neutral Financials Fundamental
BNP Paribas 23.11.2016 negative Covered RV
BNP Paribas 14.11.2016 positive Financials Fundamental
BNP Paribas 10.05.2016 positive Financials Fundamental
BPCE SA 20.02.2017 neutral Financials Fundamental
Crédit Agricole 20.02.2017 neutral Financials Fundamental
Credit Suisse Group 20.02.2017 neutral Financials Fundamental
Credit Suisse Group 16.02.2017 neutral Financials Fundamental
Credit Suisse Group 10.08.2016 neutral Financials Fundamental
Deutsche Bank AG 20.02.2017 negative Financials Fundamental
Deutsche Bank AG 28.10.2016 negative Financials Fundamental
Deutsche Bank AG 05.10.2016 negative Covered RV
Deutsche Bank AG 02.05.2016 negative Financials Fundamental
HSBC Bank PLC 20.02.2017 neutral Financials Fundamental
HSBC Bank PLC 11.05.2016 neutral Financials Fundamental
ING Bank 20.02.2017 neutral Financials Fundamental
ING Bank 08.11.2016 neutral Financials Fundamental
ING Bank 08.11.2016 neutral Financials Fundamental
ING Bank 08.04.2016 neutral Financials Fundamental
Nordea Bank 20.02.2017 neutral Financials Fundamental
Royal Bank of Scotland Group Plc
20.02.2017 neutral Financials Fundamental
Royal Bank of Scotland Group Plc
07.11.2016 neutral Financials Fundamental
Royal Bank of Scotland Group Plc
01.04.2016 neutral Financials Fundamental
Banco Santander S.A. 20.02.2017 neutral Financials Fundamental
Banco Santander S.A. 16.02.2017 neutral Financials Fundamental
Banco Santander S.A. 23.11.2016 negative Covered RV
Banco Santander S.A. 03.08.2016 neutral Financials Fundamental
Banco Santander (Single Cedula)
15.06.2016 negative Covered RV
Standard Chartered PLC 20.02.2017 neutral Financials Fundamental
UBS Group AG 20.02.2017 neutral Financials Fundamental
UBS Group AG 04.08.2016 neutral Financials Fundamental
UniCredit SpA 20.02.2017 negative Financials Fundamental
UniCredit SpA 20.12.2016 neutral Financials Fundamental
UniCredit SpA 11.05.2016 neutral Financials Fundamental
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