positive momentum continues

4 August 2017 Credit Research

Bank & Insurance Watch

UniCredit Research page 1 See last pages for disclaimer.

Positive momentum continues ■ Primary market development: July was a rather quiet month and

financials issued EUR-denominated bonds in an aggregated amount of EUR 8.35bn. German issuers Münchener Hypothekenbank and LBBW decided to launch senior unsecured bonds, Credit Suisse was active with a EUR 1.5bn 8Y senior unsecured note issued out of its holding company and Caixabank successfully placed its EUR 1bn Tier-2 transaction, attracting solid demand from investors. Another Spanish bank was in the market for subordinated notes with Bankia issuing EUR 750mn AT1 bonds, setting the final yield at 6%. The positive investor sentiment towards Spanish banks is reflected in the strong oversubscription and pricing performance of the issued bonds.

■ Secondary market development: Financials spreads continued to tighten in July. The iBoxx EUR Banks Senior index tightened by 13bp in July. Relative outperformers were senior preferred bonds of Italian banks (tightening by 16bp on average in July), French banks (tightening by 15bp) and Spanish banks (tightening by 14bp). Senior non-preferred spreads showed a similar pattern. Average spreads between senior preferred and senior non-preferred tightened to below 40bp. In the subordinated area, Tier-2s and AT1s also tightened in July, reflecting the improved outlook and investor sentiment. Tier-2s were down by 21bp mom and AT1s were down by 70bp. Spreads are very tight, in our view, and we expect further tightening potential to be limited.

■ Sector comments banks: Solid 2Q17 earnings performance expected to continue in 2H17

■ Regulatory & accounting: Latest news

■ Rating changes: We have seen quite a few rating changes, with a mixed picture and positive momentum for Spanish banks

■ Trade ideas: Take a look at our extensive trade recommendations for the bank and insurance sector

■ Event calendar: The 2Q17 earnings season is coming to an end, with some insurance companies and Benelux and German banks left to report their 2Q17 results

Contents Market comment ____________________________ 2Index spread overview ________________________ 4Sector comments ____________________________ 5

Banks ___________________________________ 5Spreads by sector ___________________________ 8Regulatory & accounting news __________________ 9Trade ideas _______________________________ 11

Alpha chaser _____________________________ 11M&A plays _______________________________ 15Relative value ____________________________ 15

Trade signal list ____________________________ 17Rating changes ____________________________ 25Event calendar _____________________________ 27

Authors Dr. Tilo Höpker Senior Credit Analyst (UniCredit Bank, Munich) +49 89 378-12960 [email protected] Natalie Tehrani Monfared Senior Credit Analyst (UniCredit Bank, Munich) +49 89 378-12242 [email protected] Dr. Michael Teig Credit Analyst (UniCredit Bank, Munich) +49 89 378-12429 [email protected] Bloomberg UCCR Internet www.research.unicredit.eu

SECTOR RECOMMENDATIONS

Sector Austria Benelux France Germany Ireland Italy Nordics Portugal Spain Switzerland UK

Banks (overall) 0 + + 0 + 0 + - + 0 -

Insurance (overall) n.a. 0 + + n.a. 0 n.a. n.a. + 0 0

Old style/Op-co bank senior 0 0 + + + 0 + 0 + 0 0

Hold-co bank senior n.a. 0 / n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 -

Senior non-preferred/T3 n.a. n.a. 0 n.a. n.a. n.a. 0 n.a. + n.a. n.a.

Bank new-style T2* + + + + + 0 + - + + +

Bank AT1 CoCos 0 0 0 0 + 0 + - + 0 -

Bank T2 CoCos + + + + + 0 + - + + 0

Bank old-style LT2* + + + + + 0 + - + + +

Bank old-style T1/UT2* - 0 0 - 0 0 0 - 0 0 -

*New-style: Basel 3-compliant; old-style Basel 2-compliant Source: UniCredit Research

Our Banks & Insurance sector assessment indicates the credit fundamentals of the overall sector. Bond recommendations: + (overweight), 0 (marketweight), - (underweight)

mailto:[email protected]�

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Market comment

Primary Market

July was a rather quiet month and financials issued EUR-denominated bonds in an aggregated amount of EUR 8.35bn (see table on next page). German issuers Münchener Hypothekenbank and LBBW decided to launch senior unsecured bonds, Credit Suisse was active with a EUR 1.5bn 8Y senior unsecured note issued out of its holding company and Caixabank successfully placed its EUR 1bn Tier-2 transaction, attracting solid demand from investors. Another Spanish bank was in the market for subordinated notes with Bankia issuing EUR 750mn AT1 bonds, setting the final yield at 6%. The positive investor sentiment towards Spanish banks is reflected in the strong oversubscription and pricing performance of the issued bonds.

Due to partly shrinking balance sheets and a strong utilization of the TLTRO program we expect lower issuance activities in 2H17. Also banks recorded good progress in building up their MREL/TLAC buffer by issuing senior non-preferred notes. In particular French banks are quite advanced in their funding plans and have already issued an EUR-equivalent of around 25bn senior non-preferred which is above the initially indicated senior non-preferred FY17 funding plan.

Secondary Market

Spreads continued to tighten in July. The iBoxx EUR Banks Senior bonds tightened by 13bp in July. Relative outperformers were senior preferred bonds of Italian banks (tightening by 16bp on average in July), French banks (tightening by 15bp) and Spanish banks (tightening by 14bp). Senior non-preferred spreads showed a similar pattern. Average spreads between senior preferred and senior non-preferred tightened to below 40bp.

In the subordinated area, Tier-2s and AT1s also tightened in July, reflecting the improved outlook and investor sentiment. Tier-2s were down by 21bp mom and AT1s were down by 70bp.

In Italy, investors positively perceived the successful precautionary recap of Banca MPS and the solution for the two weaker Venetian banks, as well as lower new NPL formation and progress to reduce NPL stock. Also the good 2Q17 result of Italian banks was accredited by market participants. Belgium and Spain passed a law on the issuance of senior non-preferred debt, anticipating the EU-wide harmonization of banks’ senior creditor hierarchy. Soon, banks will start to issue senior non-preferred instruments on a statutory basis.

A positive for the overall sector is the improving macro-economic picture and the positive tone of the 2Q17 financials published to date. 2Q17 earnings have so far shown positive results, with most banks reporting net results above consensus estimates. While some revenue figures disappointed, banks were able to reduce costs and book lower loan loss provisions, supporting profitability. And the macroeconomic environment continued to improve, with most economic indicators showing positive sentiment. The eurozone recovery continued at a solid pace in the spring. In 2Q17, GDP expanded 0.6% qoq, likely driven by a mix of solid domestic demand and firming export activity. We confirm our 2.1% GDP forecast for 2017 (for more details, please see “Eurozone: solid growth continues, ECB on track for a slow tapering”).

Spread outlook for 2017

Spreads are very tight, in our view, and we expect further tightening potential to be limited.

In the UK, we expect to see spread widening in 2H17 as sluggish progress on the Brexit negotiations will increase uncertainty. Banks might be required to relocate resources to mainland Europe. In a recent study, in case of a hard Brexit, Oliver Wyman (link) estimates additional capital requirements for banks in the wholesale banking industry of USD 30-50bn, in order to support the new European entities and lower profitability (higher costs of around USD 1bn annually due to duplicated roles and an estimated 2pp lower return on equity).

In Spain, Catalonia has unilaterally called for an independence referendum to be held on 1 October. The Catalan electorate is currently evenly split on whether or not to vote for secession. The central government has not backed the decision to call the referendum and over the next few months tensions between Barcelona and Madrid will likely increase. We expect the central government to continue with its policy to resort to the Constitutional Court to counter any secessionist act. The independence referendum could lead to spread volatility for Spanish names, but will not change our fundamental positive view on Spain’s macro-performance and its banks.

For France, the progress of the reform agenda of President Emmanuel Macron will be closely observed. The labor market reform proposal that the Elysée wants to finalize by the end of the summer will be a first litmus test on the reformability of the second-largest economy in the eurozone. A major delay in the reform process, which is not our base case, could lead to spread widening of bank credit.

Dr. Michael Teig, Credit Analyst (UniCredit Bank, Munich) +49 89 378-12429 [email protected]

https://www.research.unicredit.eu/DocsKey/economics_docs_2017_161211.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJGARGDjPFKj-2ei1E8aFPO0=&T=1�

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http://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2017/aug/OW-Wholesale-Banking-Brexit-Briefing.pdf�

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NEW ISSUES

Issue date/ announce-ment date

Issuer

Category

Amount

(EUR mn)

Final Book-

size

Over-subscription

ratioCoupon

Product Rating

MaturityIPT

(bp)Guidance

Spread launch

Current Z-spread

ISIN

7/4/2017 HSBC Holdings

plc AT1 1,250 5,000 4.0x 4.75%

Baa3/-/BBB

Perp5%-

5.125%

4.875% area

(+/-12.5bp) 4.750% 338.5 XS1640903701

7/5/2017 Raiffeisen Bank

International AT1 650 1,750 2.7x 6.13% B1/BB-/- Perp

6.375% area

6.125-6.25%

6.125% 506.8 XS1640667116

7/5/2017 LBBW Senior

unsecured (tap issue)

200 200 1.0x 0.50% A1/-/A- 7-Jun-22 n.a. 27 area MS +26 16.3 DE000LB1DVL8

7/6/2017 Rabobank Senior

unsecured 1,000 1,400 1.4x 0.50%

Aa2/A+/AA-

6-Dec-22 27 area24 (+/-2)

wpir MS +22 8.2 XS1642738816

7/11/2017 Münchener

Hypothekenbank Senior

unsecured 250 500 2.0x 0.88% A1/-/- 11-Jul-24 n.a.

40 area >> 37

area (+/-2) wpir

MS +35 17.2 DE000MHB9940

7/14/2017 CaixaBank T2 1,000 2,500 2.5x 2.75%Ba2/BB+

/BBB14-Jul-28 260 area

240 area (+/-5) wpir

MS +235

176.9 XS1645495349

7/17/2017 Credit Suisse

Group

Senior unsecured

HoldCo 1,500 3,000 2.0x 1.25%

Baa2/BBB+/A-

17-Jul-25 90 area 75/80 MS +75 66.4 CH0343366842

7/18/2017 Bankia AT1 750 2,500 3.3x 6.00% B2/B+/-- Perp6.5% area

6.000-6.125%

6.000% 517.2 XS1645651909

7/25/2017 Nationwide

Building Society

T2 1,000 2,800 2.8x 2.00%Baa1/BB

B/A-25-Jul-29 170-175

155 area (+/-5) wpir

150 133.2 XS1651453729

7/25/2017 PKO Bank Polski Senior

unsecured 750 1,600 2.1x 0.75% A3/-/- 25-Jul-21 80 area 65/70 wpir 65 45.7 XS1650147660

Source: Bloomberg, UniCredit Research




Index spread overview

IBOXX FINANCIALS BY SECTOR

Source: iBoxx, UniCredit Research

ITRAXX VS. IBOXX (SENIOR)

Source: iBoxx, markit, UniCredit Research

IBOXX FINANCIAL SECTORS ONE MONTH PERFORMANCE


ITRAXX VS. IBOXX (SUB)


MAIN IBOXX SECTORS


ITRAXX FINANCIALS VS. MAIN

Source: markit, UniCredit Research

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1,000

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Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17

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iBoxx € Banks Senior iBoxx € Banks Senior PreferrediBoxx € Banks Senior Non-Preferred Markit iBoxx EUR Banks Tier 2iBoxx € Insurance Senior iBoxx € Insurance SubordinatedCoCo Index EUR AT1

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iBoxx € Fin. Sen. ASW iTraxx Sr Fin 5Y iTraxx Sr Fin 10Y

-15 -10 -5 0 5

Banks AT1

Insurance Tier I

Insurance Tier II Dated

Insurance Tier II Perpetual

Insurance

Banks Tier 2

Insurance Senior

Banks

Banks Senior Preferred

Financial Services Subordinated

Financial Services

Financial Services Senior

Banks Senior Non-preferred

Banks Senior

1 month ASW change in bp

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100

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350


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bp

iBoxx € Fin. Sub. ASW iTraxx Sr Fin 5Y iTraxx Sr Fin 10Y

-40

-20

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iBoxx € Sub-Sovereigns iBoxx € Covered

-20

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100

120


Sp

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bp

iTraxx Main 5Y iTraxx Sr Fin 5Y Spread

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Sector comments

Banks

Solid 2Q17 earnings performance…

European banks are well into reporting their 2Q17 earnings, and the general trend reflects outperformance of consensus expectations. We have also seen less litigation charges compared to previous years and lower loan-loss-provision levels, reflecting improved asset quality, which has been driven by a brightening macroeconomic picture.

…expected to continue in 2H17

For 2H17, we expect European banks to continue to perform well. In our view, strong macro performance will continue with improving fundamentals and a rising-yield environment.

Consensus earnings forecasts have improved since mid-2016, both the 12M forward earnings estimate and the earnings-revisions ratio. The earnings-revisions ratio is the ratio of upward revisions to earnings forecasts minus downward revisions compared to the total number of earnings forecasts published. The current earnings-revisions ratio for the European banking sector – which is based on 12M forward earnings estimates – clearly shows that the overall setting for the sector is improving.

In our view, the improving picture is, to a large extent, priced into equity and bond valuations, with very tight spread levels across the sector (see also our market comment above).

EARNINGS FORECASTS AND STOXX EUROPE 600 BANKS

Source: Thomson Datastream, UniCredit Research

0

50

100

150

200

250

300

350

400

450

-40

-30

-20

-10

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

12M forward earnings estimate (ls)

Earnings revisions ratio (ls)

STOXX Europe 600 Banks price index (rs)




LATEST EARNINGS

Security name

Reporting

Appraisal

Expectations

Research Comment

(links)

Summary Content

Allianz 2Q + n/a 27-Jul-17

Allianz released its preliminary 2Q17 results. Revenues increased by 2.0% yoy, from EUR 29.4bn to EUR 29.9bn.

Allied Irish Banks 2Q + n/a 27-Jul-17

Allied Irish Banks reported 2Q17 results with an attributable net income of EUR 652mn (-21%yoy)

Assicurazioni Generali

1H n/a + 2-Aug-17 Assicurazioni Generali reported 1H17 net income of EUR 1.22bn (+3.7%), compared to market estimates of EUR 1.16bn.

AXA 1H 0 n/a 3-Aug-17

AXA reported its 2Q17 results. Underlying EPS increased by 5% yoy, from EUR 1.21 to EUR 1.26.

Banco BPI 1H 0 n/a 26-Jul-17

Banco BPI reported a 1H17 loss of EUR 102mn compared to pro forma 1H16 profit of EUR 106mn.

Bank of America 2Q n/a + 18-Jul-17

EPS for 2Q17 rose to USD 0.46, compared to USD 0.41 in 2Q16 and above consensus estimates of 0.43 (Bloomberg).

Bankia 2Q 0 n/a 26-Jul-17 Bankia reported a 2Q17 net result of EUR 210mn, above estimates of EUR 192mn, but below the EUR 245mn reported in 2Q16.

Barclay's 1H n/a + 28-Jul-17 Barclays reported 1H17 net attributable pre-tax income of GBP 2.34bn (+13% yoy). 26-Jul-17 Barclays sold the remainder of ist oil book to an unidentified buyer

BAWAG 2Q + n/a 3-Aug-17 BAWAG P.S.K. reported net profit for 2Q17 of EUR 107.4mn, up by 6% yoy.

BBVA 2Q 0 + 28-Jul-17 BBVA reported 2Q17 net attributable income of EUR 1.11bn, above the EUR 1.04bn consensus (Bloomberg).

BNP Paribas

2Q n/a +

28-Jul-17 BNP Paribas reported 2Q17 net attributable profit of EUR 2.4bn, compared to market estimates of EUR 1.91bn (Bloomberg).

14-Jul-17 BNP's Indosuez wealth-management unit aggreed to buy Credit Industrilel et Commercial's private banking operations in Singapore and Hong Kong

27-Jul-17 Ageas has agreed to sell ist 50% stake plus one share in Italian non-life insurer Cargeas Assicurazioni

CaixaBank 1H n/a + 28-Jul-17 CaixaBank reported net attributable income in 1H17 of EUR 839mn (up by 31.6% yoy from EUR 638mn).

CitiGroup 2Q + + 17-Jul-17 EPS for 2Q17 rose to USD 1.28, above market estimates of USD 1.21 (in 2Q16, EPS was USD 1.24).

Commerzbank 2Q + n/a 2-Aug-17 Commerzbank reported a consolidated 2Q17 loss of EUR 612mn, compared to a consolidated profit of EUR 253mn reported in 2Q16

Crédit Agricole

2Q n/a + 3-Aug-17

Crédit Agricole’s 2Q17 net attributable income was EUR 1.35bn, compared to market estimates of EUR 1.02bn (Bloomberg).

11-Jul-17 Crédit Agricole’s Cariparma is negotiating the acquisition of banks in Cesena, Rimini and San Miniato

Credit Suisse Group

2Q 0 + 28-Jul-17 Credit Suisse Group reported 2Q17 net income of CHF 303mn, above consensus estimates of CHF 294mn (Bloomberg).

Danske Bank 2Q n/a n/a 21-Jul-17 Dankse Bank reported 1H17 net profit of DKK 10.3bn, which is 9.6% higher than in 1H16

Deutsche Bank 2Q 0 + 27-Jul-17 Deutsche Bank reported a net profit of EUR 466mn (compared to EUR 33mn in 2Q16)

DNB 2Q + + 13-Jul-17 DNB’s 2Q17 net income of NOK 5.24bn was above the consensus estimate of NOK 4.58bn (Bloomberg).

Erste Bank 2Q 0 n/a 4-Aug-17 Erste Bank reported 2Q17 net attributable profit of EUR 362.5mn, down by 36% yoy.

Goldman Sachs 2Q n/a + 18-Jul-17 Goldman Sachs EPS came in at USD 3.95, compared to consensus estimates (Bloomberg) of USD 3.43.

HSBC 1H + + 31-Jul-17 HSBC reported a 1H17 net attributable profit of USD 7.0bn (10.1%yoy).

ING Group 2Q n/a + 2-Aug-17 ING Group reported a 2Q17 net profit of EUR 1.14bn (+6% yoy and 20% qoq).

Intesa Sanpaolo 2Q n/a +

2-Aug-17 Intesa Sanpaolo reported 2Q17 net attributable profit of EUR837 mn 12-Jul-17 Competition authority clears Intesa acquisition of Veneto banks 18-Jul-17 Agreement with labor unions concerning Veneto banks

JPMorgan 2Q + + 17-Jul-17 JPMorgan EPS rose to USD 1.82, compared to market estimates of USD 1.58 (in 2Q16, EPS was USD 1.55).

Lloyds Banking Group 1H n/a +

27-Jul-17 Lloyds Banking Group Plc reported 1H17 adjusted pretax profit of GBP 2.41bn compared to estimates of GBP 1.98bn (Bloomberg).

25-Jul-17 Lloyds may book another GBP 400mn charge for mis-selling of payment-protection insurance

Morgan Stanley 2Q n/a + 20-Jul-17 Morgan Stanley EPS for 2Q17 rose to USD 0.87 per diluted share, above consensus estimates of USD 0.77 (Bloomberg).

Nordea 2Q 0 - 20-Jul-17 Nordea reported a 2Q17 net income of EUR 743mn, down by 25% yoyand below the consensus estimate (Bloomberg) of EUR 827mn

Sabadell 2Q n/a + 28-Jul-17 Sabadell reported 2Q17 net income of EUR 235mn (up by 35% yoy),well above market estimates of EUR 186mn (Bloomberg).

Santander 2Q n/a + 28-Jul-17 Santander reported 2Q17 net attributable profit of EUR 1,749mn (up by 37% yoy)

SEB 2Q 0 + 14-Jul-17 SEB reported 2Q17 net income of SEK 4.53bn, which came in slightly above consensus estimates of SEK 4.14bn (Bloomberg).

-- to be continued overleaf --

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Security name

Reporting

Appraisal

Expectations

Research Comment

(links)

Summary Content

Société Générale 2Q n/a + 2-Aug-17 Société Générale reported group 2Q17 net income of EUR 1.06bn compared to market estimates of EUR 1.06bn (Bloomberg).

Svenska Handelsbanken

2Q 0 + 18-Jul-17 Svenska Handelsbanken reported 2Q17 net income of SEK 4.06bn, above consensus (Bloomberg) estimates of SEK 3.9bn.

Swedbank 2Q + + 19-Jul-17 Swedbank reported good 2Q17 results. Net income of SEK 4.75bn beat the consensus estimate of SEK 4.49bn (Bloomberg).

UBS 2Q 0 + 28-Jul-17 UBS Group reported a 2Q17 net profit of CHF 1.17bn (+14% yoy) above Bloomberg consensus estimates of CHF 800mn.

Wells Fargo 2Q n/a + 17-Jul-17 EPS in 2Q17 rose to USD 1.07, compared to market estimates of USD 1.01 (in 2Q16, EPS was USD 1.01).

Source: company data, Bloomberg, UniCredit Research


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Spreads by sector

BANKS SENIOR


BANKS T1


FINANCIAL SERVICES


BANKS LT2


INSURANCE


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Regulatory & accounting news

Belgium implements new insolvency hierarchy for senior bonds

In mid-July, the Belgian chamber of deputies adopted a law implementing a new insolvency hierarchy for banks in Belgium that becomes immediately effective on the date of publication in the Belgian Official Gazette. In anticipation of the partial harmonization of the European bank insolvency creditor hierarchy, announced by the European Commission (EC) in November 2017, Belgium implemented a senior preferred and a senior non-preferred asset class. The latter has to be subordinated (contractual, statutory or structural), is TLAC/MREL-eligible and ranks above capital instruments (CET1, AT1 and T2) but below senior preferred bonds. Belgium is the third of the major EU member states (after France and Spain) to implement a new insolvency hierarchy in national law, despite the EC not yet having published its final proposal on the amended Bank Recovery and Resolution Directive (BRRD) and the Capital Requirements Regulation (CRR), both of which are expected this fall.

IFRS 9 transitional rules

IFRS 9 will become effective on 1 January 2018 and will replace IAS 39. The new standard replaces the incurred-loss model of IAS 39 with an expected-credit-loss (ECL) model. On 1 January 2018, all banks that fall within the scope of IFRS 9 have to recognize the provisions calculated under the ECL model on the liability side by reducing common equity Tier-1 (CET1). To reduce the effect of a sudden decrease in the CET1 ratio at the point of transition, the European Commission (EC) has proposed a transitional period of five years. In this period part of the provisions can be recognized as CET1. In mid-July, the European Parliament published its report on the EC’s proposal. For the most part the parliament agrees with the proposal, however, some amendments were made. For example, in the EC’s proposal, the transitional amount that can be recognized in CET1 is multiplied by a factor that declines from 0.95 in 2018 to 0.25 in 2022. The parliament has proposed a factor that declines from 0.90 in 2018 to 0.20 in 2022. For more details: click here.

Structural characteristics of European banks

In July, the European Parliament published a report that documents trends in key bank variables over the 2003-16 period for the set of banks that the ECB directly supervises. The variables are considered together to indicate the extent to which banks have been moving in the direction of better performance and greater stability. Variables related to bank profitability, activity mix, size, balance sheet composition, and loan impairment were assessed.

Precautionary recapitalization – a review

A paper published by the European Parliament discussing the effects of a precautionary recapitalization, provides a critical assessment of this measure, and finds some weaknesses. In conclusion, the paper suggests two reforms in areas that are not within the scope of the Bank Recovery and Resolution Directive (BRRD) itself, but are closely related, i.e. the EU audit framework and the European Stability Mechanism. The BRRD contains several tools for the resolution of financial institutions that are deemed to be failing or likely to fail. The resolution authority may impose losses on shareholders and creditors as one way to restore solvency or to facilitate a sale of the bank. This prioritization of bail-ins of investors over contributions of public funds can be circumvented through precautionary recapitalization under Article 32 (4d) BRRD.

Banks funding plans and asset encumbrance

At the end of July, the European Banking Authority (EBA) published two reports. One report on the funding plans and one report on the asset encumbrance of European banks. The EBA asked 155 banks for their plans for funding over the three years to 2019. These plans show that, on average, total assets are projected to grow by 3.9% between 2016 and 2019. The main drivers for asset growth are loans to households and to non-financial corporates. Client deposits remain the main component in the funding mix of EU banks, with a share of more than 50%. The planned issuance of debt securities in 2017 also looks set to increase in 2018 and 2019. The asset encumbrance report shows that in December 2016, the overall weighted average encumbrance ratio stood at 26.6% compared to 25.4% in December 2015. However, the report highlights a wide dispersion across institutions and countries, which is consistent with what was observed in the previous report. Besides covered bonds, the main sources of asset encumbrance are repos and over-the-counter derivatives.

1Q17 risk dashboard for insurance sector

At the end of July, the European Insurance and Occupational Pensions Authority (EIOPA) published its updated risk dashboard, based on the 1Q17 data on European insurance companies. The results show that the risk exposure of the EU insurance sector remained stable overall in 1Q17. Solvency II ratios remained strong and stable for groups, whereas a slight deterioration was observed for solo non-life insurers. Despite these positive signs, the continuing low-yield environment and the observation that market fundamentals might not properly reflect the underlying credit risk are still important concerns for the EU insurance industry. For more details, please see the first published solvency reports of European insurers.

http://www.dekamer.be/FLWB/PDF/54/2488/54K2488007.pdf�

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A8-2017-0255+0+DOC+XML+V0//EN�

http://unicredit-globalresearch.application.hypovereinsbank.de/Docs/credit_docs_9999_161118.pdf.ashx�


http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/602097/IPOL_IDA(2017)602097_EN.pdf�

http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/602089/IPOL_IDA(2017)602089_EN.pdf�

http://www.eba.europa.eu/documents/10180/1720738/Report+on+Funding+Plans+-+July+2017.pdf�

http://www.eba.europa.eu/documents/10180/1720738/EBA+Report+on+Asset+Encumbrance+-+July+2017.pdf�

https://eiopa.europa.eu/Pages/News/EIOPA%E2%80%99s-Risk-Dashboard-first-quarter-2017-shows-relative-stable-risk-exposure-of-the-European-Union-insurance-sector.aspx�

https://eiopa.europa.eu/Pages/News/EIOPA%E2%80%99s-Risk-Dashboard-first-quarter-2017-shows-relative-stable-risk-exposure-of-the-European-Union-insurance-sector.aspx�





Action plan for NPLs

In mid-July, the European Council set out an action plan for non-performing loans (NPLs). The plan contains a mix of policy actions to help to reduce stocks of NPLs, which remain high within the EU, and to prevent their future emergence. The council highlighted the need for action in terms of bank supervision, the reform of insolvency and debt recovery frameworks and the development of secondary markets for NPLs, as well as the restructuring of the banking industry. The council agreed to revisit the issue regularly and to take stock of the evolution of NPLs in Europe and of actions taken. For more details: click here.

Natalie Tehrani Monfared Senior Credit Analyst (UniCredit Bank, Munich) +49 89 378-12242 [email protected]





Trade ideas

Note: all prices are as of 3/4 August 2017 and reflect Bloomberg data. We also think that some profit taking at current levels is in order.

Alpha chaser

(A)T1 & UT2

(A)T1/UT2 OUTRIGHT BUY AND HOLD RECOMMENDATIONS

Security name

YTC (%, ASK)

Current Price (ASK)

MS (TC)

ASW (TC)

AARB 7.625% 11/49 6.42 109.50 394.84 416.49

NDB 5.625% 6/49 6.69 84.7 518.6 456.8

BBVASM 9% 5/18-49 2.76 104.65 135.35 118.72

BBVASM 7% 2/19-49 3.04 105.90 327.10 330.80

SANTAN 6.375% 5/19-65 4.42 103.33 287.76 282.21

SANTAN 6.25% 3/19-49 3.80 109.23 374.58 383.19

SABSM 6.5% 05/22-49 6.38 103.65 552.89 544.75

BKIASM 6% 7/22-65 5.89 102.63 526.82 519.27

ISPIM 7% 1/21- perp 3.68 110.64 369.87 384.23

SOCGEN 7.375% 9/21-perp

4.45 110.84 264.54 278.16

BACR 7.875% 3/22- perp 5.33 110.34 351.97 365.32

ALVGR 1.375% 4/31 1.33 100.54 16.6 16.4

ALVGR 3% 3/28 0.93 120.84 -1.1 -5.7


We continue to recommend the AT1 bond AARB 7.625% 11/29/49. In our view, Aareal Bank has good risk management skills and disciplined underwriting standards. The bank is geographically diversified, which supports the average margin. It has a strong footprint in the US, where yields are rising. The high capitalization offers a significant buffer and ADIs cover AT1 interest payments more than 20 times over. Although Aareal is projected to suffer one of the highest Basel 4-driven inflation of risk weighted assets, we view the bank as being able to cope with higher capital requirements due to its large capital buffer and strong organic earnings capacity and the long transition period of Basel 4.

Barclays benefited from solid underlying 2Q17 earnings, putting into perspective the loss for discontinued operations. While Barclays is a UK-based global systemically important bank with sizeable international operations, it also benefits from strong core retail, commercial banking and global credit card franchises with stable and predictable earnings, despite conduct and litigation charges and likely improving capitalization due to deleveraging. Moreover, while restructuring/litigation and inherent risks from investment banking and Brexit remain, Moody’s also points to adequate funding, sound liquidity and a strong credit quality. From a relative-value perspective, we therefore recommend buying the Barclays plc AT1 USD 7.875% 03/22-perp (Ba2(hyb)/B+/BB+, XS1481041587).

Spanish banks are continuing along their recovery path. Recent results have confirmed the asset-quality improvement of Spanish banks. For more details see our 2Q17 review on Spanish banks earnings. We stick to our overweight recommendation on BBVA’s 9% USD 1.5bn 5/18-perp, BBVA 7% EUR 2/19-perp, SANTAN USD 6.375% 5/19-49 and SANTAN 6.25% 12/65. AT1s performed very strongly, but still offer some relative value, in our view. The takeover of Banco Popular by Banco Santander was well perceived by the market. Regarding EUR-denominated bonds, a closer look at BKIASM 6% 10/65 and SABSM 6.5% 8/65 shows that both AT1s have not shown the same amount of tightening as those of BBVA and Santander. Both Bankia and Sabadell are more exposed to Spain and are less geographically diversified, but we are convinced of the positive credit development of Spanish banks and therefore recommend buying BKIASM 6% 10/65 and SABSM 6.5% 8/65 as they offer more relative value.

For opportunistic and longer-term investors, we view the Fuerstenberg Capital II GmbH notes NDB 5.625% 6/49 as an opportunity. The FY16 loss of EUR 1.96bn led to a writedown of the nominal by 7%. NORD/LB reported a 1Q17 net result of EUR 214mn compared to a net loss of EUR 93mn in 1Q16. NORD/LB expects a positive result in FY17 (both in terms of group accounts and stand-alone). In its earnings call, the company also indicated a full write-back of the Fuerstenberg Capital II GmbH notes in FY17 and return of coupon payments in 2018 or 2019.

The Venetian bank deal is projected to allow Intesa to increase its market share in wealthy northeastern Italy with “neutral impacts”. We also like the fact that potentially costly future M&A activity seems limited as Intesa has scrapped plans for M&A transactions with Generali. From a relative-value perspective, Intesa stands out among its Italian peers in our coverage with its relatively good fundamentals, size and ratings and its solid results. Also, Intesa might be able to fast-track the deleveraging of its NPLs down to pre-crisis levels by end-FY19, and the FY17 is encouraging. Moreover, these fundamentals make Intesa more comparable to French issuers. We like the AT1 ISPIM EUR 7% perp 01/21 (Ba3[hyb]/B+/B+, ISIN: XS1346815787), and correspondingly like the spread pickup of this relatively short-dated (call date in 2021) AT1compared to French AT1s.

RBS AT1 price levels have benefited from positive news such as on earlier settlements and from surprisingly solid earnings that, however, benefited from the lack of last year’s one-offs. Nonetheless, as stated by RBS itself, its optimistic FY17 guidance and medium-term outlook is conditional on providing “substantially” for significant legacy issues in FY17; in the past, RBS often surprised markets with huge losses from legacy matters. Given that the profitability targeted by 2018 is far from certain (apart from costs/risks from





restructuring and especially large conduct/litigation issues), AT1 coupon linkage to capital buffers and distributable amounts (and thus, ultimately, profits) and recent outperformance, we recommend selling the RBS AT1 USD 8% 08/25-perp (Ba3u[hyb]/B/BB-, US780099CK11) at around USD 110/111 in light of the legacy challenges.

We recommend buying SOCGEN USD 7.375% 09/21-PERP (AT1, Ba2(hyb)/BB+/--, USF43628C734) given SocGen’s strategy of focused balance-sheet management by deliberately divesting capital-consuming/less-attractive businesses and investing in solid assets/growth markets. SocGen benefits from an interesting spread, an improved asset-quality/credit profile, healthy funding and a conversion trigger at a CET1 ratio of 5.125% transitional level and some 400bp of SREP buffer as of 1Q17. For investors who are not restricted to investment-grade ratings, this trade idea offers a pickup at an improved credit profile and healthy buffers for this SocGen AT1.

The ALVGR 1.375% 4/31 and the ALVGR 3% 3/28 look attractive because they are eligible for the CSPP, but have not been bought so far. We therefore recommend buying ALVGR 1.375% 4/31 and ALVGR 3% 3/28.

(L)T2

In the benchmark T2 universe (iBoxx), we would outright buy the following bonds:

T2 OUTRIGHT BUY RECOMMENDATIONS

Security name

YTC (%, ASK)

Current Price (ASK)

MS (TC)

ASW (TC)

HANRUE 5% 6/23 -43 1.01 122.75 64.4 54.5

HANRUE 5.75% 9/20 -40 0.35 116.64 38.0 33.8

MUNRE 6.25% 5/22 -42 0.73 125.94 52.2 43.0

MUNRE 6% 5/21 -41 0.49 120.70 41.9 36.0

TALANX 8.3673% 6/22 -42 1.03 134.56 81.4 64.5

CMZB 4% 3/26 2.51 111.38 178.36 189.60

DB 2.75% 2/25 2.40 102.38 180.81 181.19

NDB 6% 6/20 2.62 109.29 267.3 281.0

HESLAN 2.5% 11/24 1.77 104.95 121.0 123.6

LBBW 3.625% 6/25 2.10 110.9 146.7 155.8

PBB 2.875% 6/27 2.99 99.50 275.95 271.48


Security name YTM, %

Price (ASK)

MS (TC)

ASW (TC)

BOND RATING (M/S/F)

HSBC 3% 6/25 1.32 112.49 69.32 75.67 A2/BBB+/A+BACR 6.625% 3/22 0.86 126.13 67.30 79.80 Baa3/BBB-/A-ACAFP 4.5% 6/20 0.13 112.64 18.31 20.21 --/--/AINTNED 3% 4/23-28 1.30 109.23 97.05 102.31 Baa2/BBB/AKBCBB 2.375% 11/24 1.58 104.71 44.25 45.73 --/BBB-/A- ISPIM 5% 9/19 0.59 109.31 73.17 77.27 Ba1/BB/BBB-DBSSP 3.625% 9/22 4.05 100.21 54.14 58.04 A1/A+/A+OCBCSP 3.75% 11/22 3.10 100.49 60.22 58.96 A1/A+ /A+UOBSP 2.875% 10/22 4.03 100.19 56.50 58.64 A1/A+ /A+


We propose buying HANRUE 5% 6/23-43. We also recommend buying HANRUE 5.75% 9/20 -40. While the reinsurance market remains difficult, with low interest rates having a negative impact on investment returns, Hannover Re benefits from its good positioning in the reinsurance market. Hannover Re reported 1Q17 net income of EUR 264.8mn, down by 2% yoy and compared to market estimates (Bloomberg) of EUR 264.6mn. Results were driven by both segments, P&C and Life & Health reinsurance, together with investments. Total gross written premiums rose 7% yoy to EUR 4.5bn or 6% at constant exchange rates, which is in line with Hannover Re’s estimates.

Both the MUNRE 6.25% 5/22 -42 and the MUNRE 6% 5/21 -41, look attractive. Munich Re affirmed its FY17 consolidated profit target of EUR 2.0-2.4bn and its forecast for FY17 gross premiums written of EUR 48-50bn. Against the backdrop of the positive developments for US interest rates and waning price pressure, reinsurance has “eased off considerably”. Munich Re stated that it intends to concentrate on a disciplined underwriting policy and new business opportunities in primary insurance and reinsurance. The reinsurer’s strategy is promising, and the group remains a diversified issuer. According to Handelsblatt, which cited Munich Re CFO Joerg Schneider, Munich Re is open to a bigger acquisition, but potential takeover targets are still too expensive given increasing global insecurity. Bloomberg further reported that, according to Mr. Schneider, targets would probably be outside traditional reinsurance and that an ideal partner would be a specialized primary insurer. Also, the danger of potentially costly future M&A activity seems limited as market players have witnessed investor skepticism regarding Intesa’s (then-scrapped) potential plans for M&A transactions with Generali.

We propose buying the TALANX 8.3673% 6/22-42. Talanx reported 1Q17 net attributable income of EUR 238mn (+7% yoy), driven by a 7% higher result for the Industrial Lines Division. Operating profit (EBIT) rose 1% to EUR 576mn, compared to market estimates (Bloomberg) of EUR 564.5mn, with primary insurance representing 48% vs. 46% of attributable EBIT. Gross written premiums rose 8% yoy to EUR 9.8bn, or 7% adjusted for currency effects. This was driven by a 29% increase in Retail International Division premiums, Property/Casualty Reinsurance up 13% and a 4% rise in the Industrial Lines Division. Talanx also said that losses were “modest” across all divisions. Talanx also reiterated its outlook for 2017: It expects gross premium growth of over 1% based on stable exchange rates. The net return on investment is forecast to be at least 3% and the return on equity more than 8%. Group net income is anticipated to reach some EUR 800mn assuming no disadvantageous movements in currency and capital markets and that large losses are in line with forecasts. Talanx aims for a FY17 dividend payout ratio of 35-45% of group net income.




We maintain our buy recommendation on CMZB 4% 3/26 (Ba1/BBB-/BBB). In our view, the Tier-2 trades relatively wide compared to the index and to German peer Deutsche Bank. While short-dated Tier-2s of Commerzbank trade relative tight (see right chart), the CMZB 4% 3/26 offers some relative value. While profitability remains subdued, asset quality and capitalization remain good. Even with the loss in 2Q17, the CET1 ratio remained above 12.5% and FY17 results are expected to be positive. The 4.0 strategy implementation is ahead of plan and will further reduce the complexity of the bank.

We keep our buy recommendation for DB 5% 6/20. Deutsche Bank showed good progress on litigation and announced that it would likely post a FY17 profit. 2Q17 revenue performance disappointed, but the bank is on track with its cost saving plan and was able to post a 1H17 net profit of EUR 1.04bn. For Deutsche Bank’s Tier-2s we change our current recommendation after the strong performance of our earlier recommendation of DB 5% 6/20. We now recommend buying DB 2.75% 2/25, which offers 89bp spread pickup for 4.65 years longer maturity.

We currently deem attractive the Tier-2s of Helaba, HESLAN 2.5% 11/24. The Tier-2 LBBW 3.625% 6/25 looks attractive as well at current price levels. We view the lower Tier-2 bond NDB 6% 6/20 as currently attractive. The bond has come under pressure in the last 12 months due to higher shipping-related loan loss provisions and the large FY16 loss. However, we view the NDB 6% 6/20 as attractive. First, the other segments of NORD/LB are performing relatively strongly, which will help to (partly) offset higher loan loss provisions related to shipping in the coming years. With the release of its 1Q17 results, NDB’s plan to report a FY17 profit has become realistic. This indicates that the exceptionally high loan loss provisions of 2016 will not be recurring. Second, we view support from the owners as relatively likely in a worst-case scenario, without lower Tier-2s having to share the burden.

The Tier-2s of Deutsche Pfandbriefbank (PBB) trade wider compared to the German banks’ Tier-2 universe. The wider spread is justified partly by the more concentrated business model (business line concentration on real estate lending and geographical concentration on Europe). Also, there is a lack of track record for the bank over the complete real estate cycle. However, in our view, the spread for the new Tier-2 PBB 2.875% 6/27 has room for improvement: The bank’s fully loaded CET1 ratio in 1Q17 is 19.2%, which is very high compared to that of its European peers and well above PBB’s regulatory requirements (2017 SREP of 9.0%). Capitalization will remain well above that of its peers even after a special dividend in 2017. The bank also has conservative risk underwriting policies and very good asset quality. More subordinated material is expected to fulfill S&P’s ALAC commitments. The proposed Basel 4 reforms,

which we expect to be finalized in FY17, will increase RWAs of PBB significantly over a transition period from 2021 to 2027 (according to the current Basel 4 proposal). We view PBB as being in a position to adopt to higher capital requirements due to its organic capital-generation capability and large capital buffer. An improving stock of CET1 capital will support Tier-2s.

Despite its relatively good performance, the lower T2 bond BAWAG 8.125% v 10/23 (YTC 2.15%, ASW spread 210bp) still looks attractive relative to Tier-2s of European peers, given the strong fundamentals of the bank.

We like the HSBC Holdings PLC EUR 3.0% 6/25 bond. While certainly still facing some further volatility challenges, as a must-pay coupon, the T2 should – in contrast to AT1s– be shielded from the negative impact of the Brexit decision and challenging business activity in Asia, while benefitting from falling costs, the implementation of the bank’s strategy and the envisaged subsequent recovery in operating results.

While certainly still facing some further volatility challenges after the Brexit vote, we find the BARCLAYS Bank PLC Tier-2 EUR 6.625% 3/22 bond interesting, as it has a must-pay coupon issued by the operating entity. This latter point, however, comes with the caveat of Barclays’ plans for a new UK ring-fenced bank. Barclays benefited from solid underlying 2Q17 earnings, putting into perspective the loss for discontinued operations.

We like CA S.A.’s targeted strategy of selectively disposing capital-consuming, non-controlling investments and of focusing on ongoing cost cuts, while also focusing on key (growth) markets, as this increases the likelihood of an optimized risk-return profile. In addition, we note that CA S.A.’s solid 2Q17 net and underlying profit clearly beat market estimates. Hence, in line with the recent rating upgrade, we like the bullet (L)T2 ACAFP EUR 5.875% 6/19 (ISIN: XS0432092137), as it has a mustpay coupon. This T2 bond should also be shielded from potential revenue volatility from potentially falling trading income and potential risk-weighting pressure, which is mitigated by the above strategy. On top of the short datedness of the bond (maturing as many new regulatory requirements take full effect in 2019), this should be further mitigated by CA S.A.'s diversified business model, with its focus on classic and leading retail and commercial banking, sound asset-quality metrics and solid and improving capitalization – with a group fully loaded CET1 ratio of15.0% being 550bp above the pro-forma P2R for 2019 and CA S.A.’s fully-loaded CET1 ratio of 12.4% above the 11% MTP target.




We like T2 INTNED EUR 3% 4/23-28. While this bond is issued out of the HoldCo, ING is now a largely restructured group. Also, with a must-pay coupon, the coupon is not discretionary, unlike the one on the AT1s.

With KBC also being largely restructured, we like the T2 KBCBB EUR 2.375% 11/24 bonds with a must-pay coupon.

Intesa Sanpaolo’s Venetian bank deal is projected to allow it to increase its market share in wealthy northeastern Italy with “neutral impacts”. We also like the fact that potentially costly future M&A activity seems limited as Intesa has scrapped plans for M&A transactions with Generali. From a relative-value perspective, Intesa stands out among its Italian peers in our coverage with its relatively good fundamentals, size and ratings and its solid results. Also, Intesa might be able to fast-track the deleveraging of its NPLs down to pre-crisis levels by end-FY19, and the FY17 is encouraging. Moreover, these fundamentals make Intesa more comparable to French issuers. We therefore like the spread pickup offered by its short-dated LT2. Hence, we like the LT2 ISPIM EUR 5% 9/19.

Following the rating affirmation by Fitch of Singapore’s three major banks, Moody’s changed its outlook to stable from negative (Daily Credit Briefing, 1 June) on Singapore's banking system (Moody's rates five banks representing some 55% of systemic domestic loans and some 68% of deposits) due to improving growth conditions and stabilizing commodity prices that mitigate further weakening in asset quality and profitability. Moody’s stated that lending growth will rise moderately against the backdrop of the system's strong capital, funding and liquidity buffers and that improving growth in key trade partners will support export-oriented manufacturers and offset some weaknesses in the local economy. The reported loan growth comes on top of the banks’ solid earnings (and their healthy capitalization and solid management of asset quality), the historical robustness of their balance sheets, their earnings over past economic cycles and the historically high likelihood of state support. We like the following LT2s: DBSSP 3.625% 9/22 (A1/A+/A+, US24023DAC83), OCBCSP 3.75% 11/22 (A1/A+/A+, XS0558774161) and UOBSP 2.875% 10/22 (A1/A+/A+, XS0843128603).

Senior

SENIOR OUTRIGHT BUY RECOMMENDATIONS

Security name

YTM (%, ASK)

Current Price (ASK) MS ASW

BAC 2.375% 6/24 1.02 108.97 51.9 48.4

BAC 1.375% 9/21 0.33 104.25 21.9 21.0

DB 1.125% 3/25 1.26 99.04 60.01 58.67

DVB 1.25% 6/23 0.93 101.83 51.20 51.48


Regarding senior unsecured bonds, we like Assicurazioni Generali’s senior unsecured bonds (Baa2/--/A-) at the medium-to-longer end. Here, we like ASSGEN 5.125% 9/24 (Baa2/--/A-, XS0452314536) trading at EUR 128/129.

We recommend BAC 2.375% 6/24 and BAC 1.375% 9/21 senior debt.

Despite the lower revenues, we have a positive view on the relative valuation of Deutsche Bank. Following substantial progress on litigation issues, we expect lower volatility in the name in 2017 and further spread tightening over the medium term. We continue to recommend senior Deutsche Bank DB 1.125% 3/25. Despite the negative impact of investors’ concerns in September and October 2016 and the reduction in business in line with the 2020 strategy, we think that the loss absorbing capacity provides adequate room before a bail-in of seniors would kick. Deutsche Bank’s 2Q17 total capital (CET1+AT1+T2) is EUR 66.6bn, compared to the bank’s 2019 estimated TLAC requirement of EUR 86.6bn and 2Q17 RWAs of EUR 355bn.

In our view, senior bond DVB Bank 1.25% 6/23 offers attractive opportunities from a risk-return perspective. Spreads widened at the end of September 2016 after DVB Bank lowered its FY16 forecast and stated it would report a FY16 loss. Since this widening, the spreads have tightened relative to the iBoxx financials seniors index, but there is further tightening potential once the squeeze-out is complete and capital strengthening measures from DZ Bank are provided. As a further spread driver, Moody’s stated there was potential to upgrade its senior ratings due to an additional rating uplift for affiliate support if DZ Bank has 100% ownership and capital strengthening measures are implemented.

In Italy, we close our trade idea regarding bullet senior unsecured ISPIM 4.125% 4/20, given recent price development.

Capital structure arbitrage

There are none at the moment.

https://www.research.unicredit.eu/DocsKey/credit_docs_9999_160143.ashx?EXT=pdf&KEY=n03ZZLYZf5miJJA2_uTR8vMvlOrpBjJ-30Rl79z2PNg=&T=1�




M&A plays

There are none at the moment.

Relative value RELATIVE VALUE RECOMMENDATIONS

Recommendation Security name

YTM/YTC (%)

Current price

AT1s

Buy CS 7.125% 7/22 4.87 109.85

Sell UBS 7.125% 8/21 4.19 110.47

Buy SOCGEN 7.375% 9/21-perp 4.45 110.84

Sell BNP 7.625% 3/21-perp 4.13 111.72

Bullet LT2

Buy BAWAG 8.125% 10/23 2.06 135.1

Sell ERSTBK 7.125% 10/22 0.98 130.9

Bullet LT2

Buy RBIAV 6% 10/23 2.58 119.3

Sell RBIAV 6.625% 5/21 1.52 118.6

Bullet LT2

Buy BKIASM 3.375% 3/27 2.09 105.6

Sell BBVASM 3.5% 2/27 2.11 111.9

Bullet LT2

Buy ISPIM 5% 9/19 0.59 109.31

Sell SOCGEN 6.125% 8/18 0.01 106.33

Bullet LT2

Buy ABNANV 7.125% 7/22 0.75 130.62

Sell RABOBK 3.75% 11/20 0.29 111.20

Senior

Buy MS 1.875% 4/27 1.60 102.61

Buy MS 1.875% 3/23 0.78 106.17

Sell WFC 1% 2/27 1.30 97.51

Sell WFC 2.25% 5/23 0.62 109.31

Senior

Buy NAB 0.625% 11/23 0.52 100.91

Sell WSTP 0.875% 2/21 0.04 102.96

Senior

Buy ASSGEN 5.125% 9/24 0.81 129.6

Sell AXASA 1.125% 5/28 0.80 103.2


The CS restructuring process is on track in our view and a switch into CS seniors from UBS would add relative value in our view. For AT1s, USD AT1 CS 7.125% 7/22 offers 58bp higher ASW spread than USD AT1 UBS 7.125% 8/21.

We recommend switching to SOCGEN USD 7.375% 07/21-PERP (AT1, Ba2[hyb]/BB+/-- , USF43628C734) at USD 110/111 from BNP USD 7.625% 03/21-PERP (AT1, Ba1[hyb]/BBB-/BBB-, USF1R15XK441), given Société Générale’s strategy of focused balance-sheet management by deliberately divesting capital-consuming/ less-attractive businesses and investing in solid assets/growth markets.

BAWAG 8.125% 10/23 (Baa2/ --/BBB+) looks interesting relative to Tier-2 bond ERSTBK 7.125% 10/22 (--/BBB/BBB+). BAWAG 8.125% 10/23 offers more relative value. BAWAG reported good results in 2Q17 and it is on track to meet its FY17 targets. Moreover, after the rating upgrade, it is one of the best-rated Austrian banks.

RBI’s Tier-2s are interesting, in our view, and widened recently. The spreads widened after the announced pull-back from the IPO of the Polish unit, but RBI is now re-negotiating the change of ownership with the Polish regulator and a sale instead of an IPO could be the most likely option. We view the current spread widening of Tier-2s as a buying opportunity and like RBIAV 6% 10/23, in particular, as it offers a nice ASW spread pickup of 80bp for only 2.4 years longer maturity compared to RBIAV 6.625% 5/21.

Seniors of Bankia have tightened significantly over the last 12 months and are currently trading at the level of the iBoxx our view, Tier-2s of Bankia still offer interesting relative value. Compared to the BBVA 3.5% 2/27, BKIASM 3.375% 3/27 offers a 59bp ASW premium. For parties interested in shorter maturities, we think BKIASM 4% 5/24 offers spread-tightening potential relative to the iBoxx € Banks LT2. A likely upgrade of Bankia by S&P in the next 12 months and further improving fundamentals will, in our view, continue to support the credit story.

In Italy, we prefer ISPIM, given its relatively good fundamentals, size and ratings. We prefer bullet ISPIM 5% 9/19 LT2 vs. bullet SOCGEN 6.125% 8/18 LT2, as ISPIM is the second-largest Italian bank with solid fundamentals and is well suited to profit from a recovery in the Italian economy. The danger of potentially costly future M&A activity seems limited as Intesa has scrapped plans for M&A transactions with Generali. Please also refer to the section “Alpha chaser”. Furthermore, these fundamentals make Intesa more comparable to French AT1s.

We recommend a switch from bullet RABOBK LT2 EUR 3.75% 11/9/2020 (A3/BBB+/A, XS0557252417) to bullet ABN AMRO BANK NV LT2 EUR 7.125% 7/6/2022 (--/BBB-/A-, XS0802995166) – given the latter’s much more interesting pickup for a justified longer modified duration (both bullet bonds). While the Rabobank bond offers slightly better ratings, ABN AMRO’s increasing focus on sustainable profitability and lower risk will likely benefit from streamlining measures, as mentioned above, on top of strong results thanks to lending growth, solid margins and low impairment charges. In 2015, ABN Amro Bank announced that it had been informed by the ECB that some of the Tier-2 instruments it had issued after year-end 2011 (CRR cut-off date and before the revocation of the 403-liability statement of ABN Amro Group for the benefit of ABN Amro Bank) were to be excluded from total capital. These include the above-




mentioned 7.125% EUR 1bn bond (XS0802995166). On the other hand, ABN Amro also stated that it would not exercise the regulatory call option of the excluded instruments and that it would not have to replace the excluded instruments with new capital or subordinated instruments due to the aforementioned action.

As of June, senior bonds of US banks have a weight of 20.0% in the iBoxx Senior index. Senior bonds of Goldman Sachs are trading the widest compared to US peers, which we think is justified by the bank’s more volatile business model. We have the following relative value ideas for EUR-denominated senior bonds of US banks: Switch into the MS 1.875% 4/27 (A3/BBB+/A) out of the WFC 1% 2/27 (A2/A/AA-). MS 1.875% 4/27 offers around a 34bp higher spread, which we think is too high. Although MS 1.875% 4/27 is rated one-to-two notches lower, the bond is still rated well in the investment-grade area and has potential to tighten. The same logic applies to MS 1.375% 3/23 compared to WFC 2.25% 5/23

Given the spread difference and the identical composite ratings of the four Australian banks in our coverage, Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank Ltd. (NAB), and Westpac Banking Corporation, we recommend a switch to longer-dated “retail” bullet senior unsecured NAB EUR 0.625% 11/23 (Aa3/AA-/AA-, XS1517196272) from “institutional” bullet senior unsecured WSTP EUR 0.875% 2/21 (Aa3/AA-/--, XS1333702691). NAB has a solid balance sheet and benefits from solid underlying earnings in the Australian banking division, healthy (albeit somewhat weakening asset quality), improving capitalization, funding and liquidity, and a high probability of systemic support. NAB’s margin and loan quality should remain solid.

AXA’s iBoxx senior unsecured bond (AXASA 1.125% 5/28) trades slightly tighter than its European peers. We think this is owed to the fact that the AXA senior bond is part of the CSPP since mid-July 2016. We recommend selling the AXASA 1.125% 5/28 and buying ASSGEN 5.125% 9/24 (Baa2/--/A-). The switch offers a pickup of 48bp for four years less maturity. Moreover, Generali reported good 1H17 results and Fitch assigned the same rating to the senior bonds of AXA and Generali.

Dr. Tilo Höpker, Senior Credit Analyst (UniCredit Bank, Munich) +49 89 378-12960 [email protected]

Dr. Michael Teig, Credit Analyst (UniCredit Bank, Munich) +49 89 378-12429 [email protected]




Trade signal list

Important reminder: Our "Trade Signal List" (TSL) covers all constituents of the current on-the-run iTraxx Europe and the iTraxx Crossover series as well as most iBoxx Europe Corporates constituents and some selected liquid "off index" Bonds and CDS. The TSL can be understood as a quantitative tool supporting trading strategies and generating investment ideas. However, pure quantitative measures do not include any qualitative view on company-specific developments and hence should be seen as additional information only! All tables are sorted by descending Z-score, indicating deviation from the mean.

CDS PAIR TRADES

Debt

Sell Protection

Sell Rating

Sell CDS

Buy Protection

Buy Rating

Buy CDS Pickup

Pickup Z-Score

SNRFOR de Volksbank Baa1/A-/BBB+ 320 Raiffeisen Bank Int. Baa1/BBB+/-- 125 196 4.07

SNRFOR de Volksbank Baa1/A-/BBB+ 320 Credit Suisse Baa2/BBB+/A- 66 254 3.67

SUBLT2 de Volksbank Baa3/BBB-/BBB 481 Danske Bank --/BB+/BBB 76 405 3.56

SUBLT2 de Volksbank Baa3/BBB-/BBB 481 UBS Baa2/--/BB+ 74 407 3.35

SNRFOR de Volksbank Baa1/A-/BBB+ 320 RBS A3/BBB+/BBB+ 49 271 3.31

SUBLT2 de Volksbank Baa3/BBB-/BBB 481 Barclays Baa3/BBB-/BBB 77 403 3

SUBLT2 de Volksbank Baa3/BBB-/BBB 481 RBS Ba1/--/BBB 78 402 2.9

SUBLT2 Nordea Baa1/A-/A+ 76 Rabobank A3/BBB+/A 69 7 2.05

SUBLT2 Landesbank Berlin Baa1/--/-- 126 Macquarie Baa2/BBB/A- 118 8 2.02

SUBLT2 Crédit Agricole Baa2/BBB/A 97 AXA A3/BBB+/BBB 78 19 1.89

SUBLT2 Nordea Baa1/A-/A+ 76 SEB Baa1/BBB+/A+ 61 15 1.87

SNRFOR Bank of China A1/--/A 77 Macquarie A2/A/A 61 16 1.83

SNRFOR China Overseas Land & Investment Baa1/BBB+/A- 170 Gecina A3/BBB+/-- 49 122 1.83

SNRFOR Deutsche Bank Baa2/A-/A- 81 BBVA Baa1/BBB+/A- 53 28 1.77

SNRFOR NIBC Bank NV Baa1/BBB-/BBB- 176 Intesa Sanpaolo Baa1/BBB-/BBB 74 101 1.74

SNRFOR JPMorgan Chase A3/A-/A+ 47 KBC --/A/A 35 13 1.73

SNRFOR NIBC Bank NV Baa1/BBB-/BBB- 176 UniCredit Baa1/BBB-/BBB 79 97 1.72

SNRFOR Toronto-Dominion Bank Aa2/AA-/AA- 66 Westpac Aa3/AA-/AA- 48 18 1.7

SNRFOR Toronto-Dominion Bank Aa2/AA-/AA- 66 National Australia Bank Aa3/AA-/AA- 49 18 1.68

SUBLT2 JPMorgan Chase Baa1/A-/A 72 Sumitomo Mitsui A2/--/A-*- 62 9 1.68

SNRFOR Bank of Nova Scotia A1/A+/AA- 56 Wells Fargo & Co A2/A/AA- 43 13 1.67

SNRFOR Toronto-Dominion Bank Aa2/AA-/AA- 66 Aust. & NZ. Banking Group Aa3/AA-/AA- 49 18 1.66

SNRFOR Toronto-Dominion Bank Aa2/AA-/AA- 66 Commonwealth Bank of Australia Aa3/AA-/AA- 49 17 1.62

SUBLT2 Citigroup Baa3/BBB/A- 89 Credit Suisse Baa3/BBB/BBB+ 81 8 1.62

SNRFOR JPMorgan Chase A3/A-/A+ 47 Sumitomo Mitsui A1/A/A- 36 11 1.61

SNRFOR China Overseas Land & Investment Baa1/BBB+/A- 170 Hammerson Baa1/--/A- 91 80 1.56

SNRFOR SCOR --/AA-/A+ 58 ZFS A1/AA-/A+ 31 27 1.53

SUBLT2 Société Générale Baa3/--/A- 111 Credit Suisse Baa3/BBB/BBB+ 81 30 1.51

SNRFOR Liberty Mutual Baa2/BBB/BBB- 125 XL Group --/--/BBB 41 85 1.48

SNRFOR SCOR --/AA-/A+ 58 Crédit Agricole A1/A/A+ 31 27 1.44

SUBLT2 Nationwide Baa1/--/A- 103 Standard Chartered Baa1/--/A- 71 32 1.43

SNRFOR SCOR --/AA-/A+ 58 BNP Paribas A1/A/A+ 33 25 1.42

SUBLT2 ABN Amro Bank Baa2/BBB-/A- 153 Credit Suisse Baa3/BBB/BBB+ 81 72 1.41

SUBLT2 Goldman Sachs Baa2/--/A- 107 ING Baa2/--/A 58 50 1.34

SUBLT2 Morgan Stanley Baa2/BBB+/A- 92 ING Baa2/--/A 58 35 1.34

SNRFOR NN Group Baa2/BBB+/A- 65 AIG Baa1/BBB+/BBB+ 52 13 1.33

SNRFOR JPMorgan Chase A3/A-/A+ 47 MUFG A1/A/A 36 11 1.29

SUBLT2 Bankinter Ba1/BB+/-- 193 CaixaBank Ba2/--/BBB- 169 24 1.29

SUBLT2 Lloyds Banking Group Baa2*+/BBB/A- 75 ING Baa2/--/A 58 17 1.28

SUBLT2 Swedbank Baa1/A-/A+ 91 Rabobank A3/BBB+/A 69 21 1.28

SUBLT2 Wells Fargo & Co A3/A/A+ 66 MUFG A1/--/A- 61 6 1.26

SUBLT2 Aviva Baa1*+/BBB/BBB+ 119 AXA A3/BBB+/BBB 78 40 1.25

SUBLT2 Landesbank Berlin Baa1/--/-- 126 ING Baa2/--/A 58 68 1.22





CASH BOND PAIR TRADES

Debt

Buy Bond

Buy Bond Rating

Buy ASW

Sell Bond

Sell Bond Rating

Sell ASW Pickup

Pickup Z-Score

LT2 CBAAU 2% 22 Apr 27 Baa1/BBB/-- 98 BACR 6.625% 30 Mar 22 Baa3/BBB-/A- 86 11 2.58

SEN MUFG 0.875% 11 Mar 22 A1/A+/-- 22 INTNED 4.5% 21 Feb 22 A1/A+/A+ 6 17 2.55

SEN GS 2.5% 18 Oct 21 A3/BBB+/A 25 C 1.375% 27 Oct 21 Baa1/BBB+/A 18 6 2.51

T2 dated KOMLAN 4.25% 10 Jun 45 Baa1/BBB/-- 209 CNPFP 4.25% 05 Jun 45 --/BBB+/-- 192 17 2.46

LT2 KBCBB 1.875% 11 Mar 27 --/BBB-/A- 93 BACR 6.625% 30 Mar 22 Baa3/BBB-/A- 86 7 2.31

SEN CCB 1.5% 11 Feb 20 A2/--/-- 70 SRBANK 2.125% 03 Feb 20 A1/--/A- 15 55 2.3

SEN NWIDE 0.625% 19 Apr 23 Aa3/A/A+ 22 BNP 4.5% 21 Mar 23 A1/A/A+ 5 17 2.23

SEN MUFG 0.875% 11 Mar 22 A1/A+/-- 22 ABNANV 4.125% 28 Mar 22 A1/A/A+ 7 16 2.2

SEN MET 0.875% 20 Jan 22 Aa3/AA-/AA- 11 ALVGR 3.5% 14 Feb 22 Aa3/AA/AA- -16 27 2.08

LT2 LBBER 5.875% 25 Nov 19 Baa1/--/-- 66 KBCBB 2.375% 25 Nov 24 --/BBB-/A- 52 13 2.04

LT2 STANLN 3.625% 23 Nov 22 Baa1/BBB-/A- 103 BPCEGP 2.75% 30 Nov 27 Baa3/BBB/A- 91 11 2.04

SEN NWIDE 0.625% 19 Apr 23 Aa3/A/A+ 22 ACAFP 5.125% 18 Apr 23 A1/A/A+ 4 18 1.98

HYBRID DBOERS 2.75% 05 Feb 41 --/A+/-- 88 CRLOG 5.454% 16 Feb 21 A1/--/-- 32 56 1.97

SEN SCBNOR 0.375% 17 Feb 20 A3/--/A- 9 SANTAN 4% 24 Jan 20 A3/A-/A- 3 6 1.95

SEN NAB 0.35% 07 Sep 22 Aa3/AA-/-- 6 NAB 2.75% 08 Aug 22 Aa3/AA-/AA- -2 8 1.95

SEN CS 1.375% 31 Jan 22 A1/A/A 9 BPCEGP 4.5% 10 Feb 22 A2/A/A -1 10 1.88

SEN CCB 1.5% 11 Feb 20 A2/--/-- 70 SOCGEN 2.25% 23 Jan 20 A2/A/A -3 73 1.72

SEN MUFG 0.875% 11 Mar 22 A1/A+/-- 22 BNS 0.375% 06 Apr 22 A1/A+/AA- 13 10 1.67

SEN CBAAU 0.5% 11 Jul 22 Aa3/AA-/AA- 4 NAB 2.75% 08 Aug 22 Aa3/AA-/AA- -2 6 1.67

SEN SUMIBK 0.606% 18 Jan 22 A1/A-/-- 24 BPCEGP 4.5% 10 Feb 22 A2/A/A -1 25 1.66

SEN MUFG 0.875% 11 Mar 22 A1/A+/-- 22 HSBC 1.5% 15 Mar 22 A1/A/AA- 18 5 1.64

LT2 SANTAN 3.25% 04 Apr 26 Baa2/BBB/BBB+ 138 BPCEGP 2.875% 22 Apr 26 Baa3/BBB/A- 104 33 1.6

SEN CS 1% 07 Jun 23 A1/A/A 18 SOCGEN 0.75% 26 May 23 A2/A/A 7 12 1.58

SEN WFC 2.125% 04 Jun 24 A2/A/AA- 31 BNP 2.375% 20 May 24 A1/A/A+ 15 16 1.51

SEN CS 1.375% 31 Jan 22 A1/A/A 9 BNP 4.125% 14 Jan 22 A1/A/A+ -6 15 1.5

SEN CBSBKF 1% 06 May 20 --/A-/-- 28 NOMURA 1.125% 03 Jun 20 --/A-/-- 16 13 1.48

SEN EBIUH 1.75% 23 Mar 22 A3/--/A+ 86 MINGNO 0.5% 09 Mar 22 A1/--/A- 27 59 1.47

SEN WFC 2.125% 04 Jun 24 A2/A/AA- 31 ACAFP 2.375% 20 May 24 A1/A/A+ 18 14 1.44

SEN GYCGR 1.5% 17 Apr 25 Baa2/BBB+/-- 73 ANNGR 1.5% 31 Mar 25 --/BBB+/-- 52 21 1.42

LT2 LLOYDS 4.5% 18 Mar 30 Baa2*+/BBB-/A- 139 SOCGEN 2.625% 27 Feb 25 Baa3/--/A- 100 39 1.4

SEN MINGNO 0.5% 09 Mar 22 A1/--/A- 22 BPCEGP 4.5% 10 Feb 22 A2/A/A -1 23 1.4

SEN ALATPF 1.5% 15 Jul 24 --/BBB/-- 115 CARMIL 2.375% 16 Sep 24 --/BBB/-- 87 29 1.37

SEN CCB 1.5% 11 Feb 20 A2/--/-- 70 HESLAN 0.375% 10 Mar 20 A1/A-/A+ 6 63 1.35

SEN SRBANK 0.375% 10 Feb 22 A1/--/A- 17 BPCEGP 4.5% 10 Feb 22 A2/A/A -1 18 1.29

SEN GS 2.5% 18 Oct 21 A3/BBB+/A 25 LLOYDS 0.75% 09 Nov 21 Baa1*+/BBB+/A+ 19 6 1.27

SEN RABOBK 4.75% 06 Jun 22 Aa2/A+/AA- 4 NDASS 0.3% 30 Jun 22 Aa3/--/AA- 0 5 1.25

SEN SANUK 1.125% 14 Jan 22 Aa3/A/A 15 BNP 4.125% 14 Jan 22 A1/A/A+ -6 21 1.25

SEN WPC 2.25% 19 Jul 24 Baa2/BBB/-- 103 CARMIL 2.375% 16 Sep 24 --/BBB/-- 87 17 1.24

SEN WFC 2.25% 02 May 23 A2/A/AA- 27 ACAFP 5.125% 18 Apr 23 A1/A/A+ 4 24 1.22

SEN UBS 1.75% 16 Nov 22 Baa1/A-/A 27 SANTAN 1.375% 14 Dec 22 A3/A-/A- 14 13 1.21

SEN DB 0% 15 Oct 26 Baa2/BBB-/A- 106 UCGIM 2.125% 24 Oct 26 Baa1/BBB-/BBB 75 31 1.19

SEN JPM 2.75% 01 Feb 23 A3/A-/A+ 26 BPCEGP 4.25% 06 Feb 23 A2/A/A 13 13 1.18

SEN SANUK 2% 14 Jan 19 Aa3/A/A 4 ABNANV 4.75% 11 Jan 19 A1/A/A+ -1 6 1.18

SEN ASBBNK 0.5% 17 Jun 20 A1/AA-/AA- 6 NAB 4% 13 Jul 20 Aa3/AA-/AA- -2 8 1.18

SEN SUMIBK 2.75% 24 Jul 23 A1/A/-- 32 ACAFP 3.125% 17 Jul 23 A1/A/A+ 15 17 1.15

SEN SANSCF 0.875% 24 Jan 22 A3/BBB+/A- 33 BBVASM 0.625% 17 Jan 22 Baa1/BBB+/A- 23 11 1.14

SEN CS 1% 07 Jun 23 A1/A/A 18 DANBNK 0.75% 02 Jun 23 A2/A/A 14 5 1.12

SEN JPM 1.375% 16 Sep 21 A3/A-/A+ 10 SOCGEN 0.125% 05 Oct 21 A2/A/A 0 9 1.12

SEN SUMIBK 1% 19 Jan 22 A1/A/-- 19 BPCEGP 4.5% 10 Feb 22 A2/A/A -1 20 1.08

SEN SRBANK 2.125% 14 Apr 21 A1/--/A- 9 BPCEGP 2.125% 17 Mar 21 A2/A/A 0 9 1.07





CDS CURVE STEEPENER

Debt

Trade Name

Rating

iBoxx Sector

Spread for Short Duration

Spread for Long Duration

Direction

Slope Slope Z-

ScoreHedge Ratio Carry

SNRFOR RBIAV 3Y vs. 7Y steepener Baa1/BBB+/-- BAK 91 127 S 1.6 3.08 2.25 77

SUBLT2 BAC 3Y vs. 7Y steepener Baa3/BBB/A- BAK 55 109 S 1.11 2.67 2.21 12

SUBLT2 C 3Y vs. 7Y steepener Baa3/BBB/A- BAK 57 117 S 1.08 2.6 2.21 9

SNRFOR NDASS 3Y vs. 7Y steepener Aa3/AA-/AA- BAK 16 31 S 1.21 2.26 2.33 6

SUBLT2 NDASS 3Y vs. 7Y steepener Baa1/A-/A+ BAK 69 81 S 1.97 2.25 2.31 79

SUBLT2 NDB 3Y vs. 7Y steepener B1/--/AAA OTP 350 404 S 1.84 2.13 2.13 340

SUBLT2 AIB 3Y vs. 7Y steepener Ba2/--/C BAK 264 426 S 1.29 2.08 2.08 122

SUBLT2 MS 3Y vs. 7Y steepener Baa2/BBB+/A- BAK 61 113 S 1.2 2.05 2.21 22

SNRFOR NIBCAP 3Y vs. 7Y steepener Baa1/BBB-/BBB- BAK 136 187 S 1.59 2.01 2.2 111

SNRFOR LBBER 3Y vs. 7Y steepener BAK 113 129 S 1.98 1.88 2.26 126

SNRFOR ABNANV 3Y vs. 7Y steepener A1/A/A+ BAK 53 95 S 1.27 1.88 2.27 26

SUBLT2 LBBER 3Y vs. 7Y steepener Baa1/--/-- BAK 113 129 S 2 1.88 2.29 129

SUBLT2 ABNANV 3Y vs. 7Y steepener Baa2/BBB-/A- BAK 106 189 S 1.24 1.88 2.22 46

SNRFOR CHIOLI 3Y vs. 7Y steepener Baa1/BBB+/A- RES 128 184 S 1.49 1.86 2.14 90

SUBLT2 DANBNK 3Y vs. 7Y steepener --/BB+/BBB BAK 49 94 S 1.18 1.83 2.29 17

SNRFOR AMT 3Y vs. 7Y steepener Baa3/BBB-/BBB RES 120 187 S 1.37 1.81 2.13 69

SUBLT2 SOCGEN 3Y vs. 7Y steepener Baa3/--/A- BAK 69 138 S 1.14 1.8 2.26 19

SUBLT2 NWIDE 3Y vs. 7Y steepener Baa1/--/A- BAK 77 119 S 1.47 1.77 2.28 56

SUBLT2 SCOR 3Y vs. 7Y steepener A2/A-/A- INN 85 147 S 1.31 1.7 2.26 45

SUBLT2 GS 3Y vs. 7Y steepener Baa2/--/A- BAK 67 136 S 1.08 1.66 2.19 11


CDS CURVE FLATTENER

Debt

Trade Name

Rating

iBoxx Sector

Spread for Short Duration

Spread for Long Duration

Direction

Slope Slope Z-

ScoreHedge Ratio Carry

SNRFOR SWEDA 3Y vs. 7Y flattener Aa3/AA-/AA- BAK 13 36 F 0.85 -3.19 2.32 6

SNRFOR AIG 3Y vs. 7Y flattener Baa1/BBB+/BBB+ INN 25 77 F 0.72 -2.59 2.21 21

SUBLT2 WSTP 3Y vs. 7Y flattener A3/BBB+/A+ BAK 53 130 F 0.9 -2.01 2.19 13

SUBLT2 BBVASM 3Y vs. 7Y flattener Baa3/--/BBB+ SIC 78 175 F 0.99 -1.96 2.23 2

SUBLT2 INTNED 3Y vs. 7Y flattener Baa2/--/A BAK 30 80 F 0.87 -1.62 2.3 10

SNRFOR WSTP 3Y vs. 7Y flattener Aa3/AA-/AA- BAK 26 67 F 0.85 -1.52 2.22 10

SNRFOR SANTAN 3Y vs. 7Y flattener A3/A-/A- SIC 25 63 F 0.91 -1.48 2.3 6

SNRFOR ANZ 3Y vs. 7Y flattener Aa3/AA-/AA- BAK 26 67 F 0.85 -1.37 2.22 10

SNRFOR MWDP 3Y vs. 7Y flattener --/BBB-/-- FSV 32 110 F 0.64 -1.34 2.24 40

SNRFOR ULFP 3Y vs. 7Y flattener --/A/A+ RES 23 67 F 0.78 -1.29 2.29 15

SNRFOR SPG 3Y vs. 7Y flattener A2/A/-- RES 36 116 F 0.67 -1.26 2.17 38

SNRFOR MQGAU 3Y vs. 7Y flattener A2/A/A BAK 34 91 F 0.83 -1.09 2.2 15

SNRFOR BBVASM 3Y vs. 7Y flattener Baa1/BBB+/A- SIC 32 75 F 0.97 -1 2.28 2

SNRFOR HMSOLN 3Y vs. 7Y flattener Baa1/--/A- RES 48 113 F 0.95 -0.98 2.24 6

SNRFOR RABOBK 3Y vs. 7Y flattener Aa2/A+/AA- BAK 17 41 F 0.95 -0.96 2.32 2

SNRFOR NAB 3Y vs. 7Y flattener Aa3/AA-/AA- BAK 26 67 F 0.85 -0.94 2.22 10

SNRFOR INVSA 3Y vs. 7Y flattener Aa3/AA-/-- FSV 23 57 F 0.94 -0.89 2.3 4

SUBLT2 HSBC 3Y vs. 7Y flattener A2/BBB+/A+ SFH 32 74 F 0.99 -0.87 2.31 1

SNRFOR STANLN 3Y vs. 7Y flattener A2/BBB+/A+ BAK 23 53 F 1 -0.79 2.31 0

SNRFOR INTNED 3Y vs. 7Y flattener Baa1/A-/A+ BAK 14 39 F 0.83 -0.76 2.32 7





OUTRIGHT CDS TRADES

Debt

Issuer (Ticker)

Rating

iBoxx Sector 1Y Mid 3Y Mid 5Y Mid

1d change

1w change

1m change

60d Z-Score

SNRFOR de Volksbank (DEVOBA) Baa1/A-/BBB+ BAK 207 265 320 4.8 73 73.1 3.75

SUBLT2 de Volksbank (DEVOBA) Baa3/BBB-/BBB BAK 311 397 481 7.2 109.2 109.3 3.7

SNRFOR Bank of Nova Scotia (BNS) A1/A+/AA- BAK 19 37 56 0 0.6 4.9 1.97

SNRFOR Liberty Mutual (LIBMUT) Baa2/BBB/BBB- INN 32 74 125 0.5 1.5 4.4 1.14

SNRFOR AON (AON) Baa2/A-/BBB+ INN 11 32 55 0 0 0.1 0.94

SNRFOR Honda (HNDA) A1*-/A+/-- ATO 19 40 66 0 0 1.1 0.85

SUBLT2 Emirates NBD (EBIUH) Baa2/--/-- BAK 84 150 186 0 5.2 7.5 0.77

SUBLT2 LBBW (LBBW) Baa2/--/BBB OEP 150 177 198 4 8.3 -2.8 0.74

SNRFOR IBK (INDKOR) Aa2/AA/AA- BAK 21 39 67 -0.3 1 3.1 0.55

SUBLT2 SCOR (SCOR) A2/A-/A- INN 46 85 136 3.8 79.7 4 0.55

SUBLT2 Allied Irish Banks (AIB) Ba2/--/C BAK 179 264 401 -0.1 -0.1 -0.4 0.51

SNRFOR American Tower (AMT) Baa3/BBB-/BBB RES 60 120 176 0 0 0 0.46

SNRFOR SCOR (SCOR) --/AA-/A+ INN 13 34 58 1.4 1.6 3.8 0.45

SNRFOR Raiffeisen Bank Int. (RBIAV) Baa1/BBB+/-- BAK 39 91 125 -12 -9.9 -0.5 0.27

SNRFOR LBBW (LBBW) A1/--/A- OEP 32 45 55 1.1 2.3 -0.8 0.25

SUBLT2 Nordea (NDASS) Baa1/A-/A+ BAK 47 69 76 0.1 13.6 3.7 0.2

SUBLT2 ABN Amro Bank (ABNANV) Baa2/BBB-/A- BAK 71 106 153 0 0 0 0.19

SNRFOR ABN Amro Bank (ABNANV) A1/A/A+ BAK 36 53 77 0 0 0 0.14

SNRFOR NIBC Bank NV (NIBCAP) Baa1/BBB-/BBB- BAK 105 136 176 7.1 4.9 4.9 0.12

SUBLT2 Bankinter (BKTSM) Ba1/BB+/-- SIC 104 123 193 -1 -5.7 8.1 0.06

SNRFOR Toronto-Dominion Bank (TD) Aa2/AA-/AA- BAK 24 38 66 0.3 -0.1 -0.9 -0.06

SNRFOR Berkshire Hathaway (BRK) Aa2/AA*-/A+ FSV 12 27 49 0.2 -0.3 1.7 -0.18

SNRFOR Emirates NBD (EBIUH) BAK 29 80 137 0 -2.9 -3 -0.2

SUBLT2 Svenska Handelsbanken (SHBASS) A3/A-/AA- BAK 13 43 67 0.9 1.1 1.3 -0.28

SUBLT2 Bank of America (BAC) Baa3/BBB/A- BAK 31 55 83 0.3 0.7 1.5 -0.31

SNRFOR Banco Popular Espanol (POPSM) Ba1*+/BBB+/A- SIC 25 48 69 0 0 -6.3 -0.34

SNRFOR SEB (SEB) Aa3/A+/AA- BAK 7 17 30 -1.1 -0.4 3.5 -0.37

SUBLT2 Crédit Mutuel (BFCM) A3/--/BBB BAK 27 38 48 0 0 -0.5 -0.42

SUBLT2 Nationwide (NWIDE) Baa1/--/A- BAK 62 77 103 0 -0.5 9.5 -0.43

SUBLT2 Prudential (PRUFIN) A3/A-/BBB+ 25 93 131 -0.5 1.8 -0.8 -0.47

SNRFOR Aegon (AEGON) A3/A-/BBB+ INN 27 51 75 0 1.8 -0.8 -0.48

SUBLT2 Nord/LB (NDB) B1/--/AAA OTP 253 350 366 -0.7 -0.1 6.1 -0.48

SUBLT2 Banco Popular Espanol (POPSM) C/--/-- SIC 62128 37843 28084 51.7 381.6 -7017.5 -0.48

SUBLT2 Swedbank (SWEDA) Baa1/A-/A+ BAK 40 52 91 0.8 1.7 3.6 -0.49

SNRFOR Prudential (PRUFIN) A2/A+/A 18 39 63 -0.3 1.3 -0.6 -0.53

SNRFOR Nordea (NDASS) Aa3/AA-/AA- BAK 9 16 27 0 3.8 -7.6 -0.53

SUBLT2 BNP Paribas (BNP) Baa2/BBB+/BBB INN 32 68 106 -1.3 0.9 2.7 -0.53

SUBLT2 NN Group (NNGRNV) Baa3/BBB*-/BBB INN 68 104 123 0.9 1.3 2.7 -0.54

SUBLT2 Bank of China (BCHINA) BAK 18 52 97 -0.9 -2.9 -10.9 -0.54

SNRFOR Deutsche Bank (DB) Baa2/A-/A- SIC 28 54 81 0.2 0.9 0.4 -0.55

SNRFOR Crédit Mutuel (BFCM) Aa3/A/A+ BAK 27 38 48 0 0 -0.5 -0.55

SNRFOR Barclays (BACR) A1/A-/A BAK 13 29 43 0.2 0.6 2.9 -0.56

SNRFOR China Overseas Land & Investment (CHIOLI) Baa1/BBB+/A- RES 101 128 170 0 0 0 -0.58

SUBLT2 Wells Fargo & Co (WFC) A3/A/A+ BAK 19 39 66 -0.1 0.2 1.3 -0.58

SUBLT2 Société Générale (SOCGEN) Baa3/--/A- BAK 30 69 111 0.3 1.6 0.3 -0.59

SUBLT2 Aviva (AVLN) Baa1*+/BBB/BBB+ INN 40 89 119 -0.5 0.1 0.1 -0.6

SNRFOR Bank of America (BAC) Baa1/BBB+/A BAK 18 32 51 0.5 0 0.9 -0.62

SUBLT2 Citigroup (C) Baa3/BBB/A- BAK 31 57 89 0.1 0.1 -0.1 -0.63

SNRFOR Société Générale (SOCGEN) A2/A/A BAK 10 22 35 0 1.5 -1.5 -0.64

SNRFOR Fidelity National Information Services (FIS) Baa2/BBB/BBB THE 29 75 115 0 0 0 -0.65





OUTRIGHT CASHBOND TRADES

Debt

Bond

Bond Rating

iBoxx Sector Px

Yiel to Worst mDur ASW

1d change

1w change

1m change

60d Z-Score

SEN NDB 0.625% 24 Sep 18 Baa3/--/A- BAK 100.48 0.2 1.1 43 2 -3 4 0.2

SEN EBIUH 1.75% 23 Mar 22 A3/--/A+ BAK 102.825 1.1 4.4 93 1 1 8 0

SEN CADEPO 3.5% 23 Jun 20 Aaa/AAA/-- FSV 109.335 0.2 2.8 32 0 0 0 -0.1

SEN POPSM 2% 03 Feb 20 Ba1*+/--/A- BAK 104.549 0.2 2.4 27 2 -2 -10 -0.3

SEN LBBW 0.375% 29 Jan 19 A1/--/A- BAK 100.704 -0.1 1.5 11 2 0 0 -0.4

SEN C 4.375% 02 Nov 18 Baa1/BBB+/A BAK 105.666 -0.2 1.2 4 0 -1 -5 -0.4

SEN MS 6.5% 28 Dec 18 A3/BBB+/A BAK 109.307 -0.2 1.3 5 1 0 0 -0.5

LT2 BAC 4.625% 14 Sep 18 Baa3/BBB/A- BAK 105.078 0 1.1 28 1 -1 7 -0.5

SEN KBC 2.125% 10 Sep 18 A1/A/A BAK 102.554 -0.2 1.1 4 1 0 -1 -0.5

SEN ICADFP 1.75% 10 Jun 26 --/BBB+/-- RES 103.063 1.4 7.9 67 1 -1 -7 -0.6

SEN HEMSOF 1% 09 Sep 26 --/A-/-- RES 96.475 1.4 8.5 62 1 -3 -5 -0.6

SEN DB 0% 20 Jan 32 Baa2/BBB-/A- BAK 68.276 2.7 14.1 108 1 -1 -2 -0.7

LT2 CBAAU 5.5% 06 Aug 19 A3/BBB+/A+ BAK 110.819 0.1 1.9 26 1 -1 -9 -0.7

LT2 ANZ 5.125% 10 Sep 19 A3/BBB+/A+ BAK 110.549 0.1 2 24 1 -1 -9 -0.7

SEN GE 6% 15 Jan 19 A1/AA-/AA- FSV 108.881 -0.2 1.4 7 0 -2 -4 -0.8

SEN RABOBK 3.5% 17 Oct 18 Aa2/A+/AA- BAK 104.486 -0.2 1.2 -1 0 -1 -2 -0.8

SEN NDB 1% 20 Jan 21 Baa3/--/A- BAK 100.938 0.7 3.4 67 1 -4 -4 -0.8

SEN AARB 1.625% 05 Feb 19 --/--/BBB+ BAK 102.263 0.1 1.5 33 3 0 -5 -0.8

SEN RBIAV 1.875% 08 Nov 18 Baa1/BBB+/-- BAK 102.433 -0.1 1.2 17 1 1 -7 -0.8

SEN RABOBK 1.75% 22 Jan 19 Aa2/A+/AA- BAK 102.918 -0.2 1.5 -3 2 2 -7 -0.8

SEN VENBAN 4% 20 May 19 --/BBB-/-- BAK 106.929 0.1 1.8 30 -7 -16 -70 -0.8

T2 dated DANPEN 4.375% 29 Sep 45 --/BBB+/-- INN 114.333 2.4 6.7 190 6 4 -5 -0.8

SEN CS 0.625% 20 Nov 18 A1/A/A BAK 101.03 -0.2 1.3 5 1 2 -8 -0.8

SEN MA 2.1% 01 Dec 27 A2/A/-- FSV 109.466 1.1 9 26 0 0 -6 -0.8

T2 dated KOMLAN 4.25% 10 Jun 45 Baa1/BBB/-- INN 111.375 2.6 6.7 213 6 6 -6 -0.8

SEN CHIOLI 1.75% 15 Jul 19 Baa1/BBB+/A- RES 102.452 0.5 1.9 65 1 -1 -7 -0.8

SEN VIVATN 2.375% 17 May 24 --/--/BBB- INN 97.609 2.8 6.1 222 0 -15 -53 -0.8

SEN CCB 1.5% 11 Feb 20 A2/--/-- BAK 102.081 0.7 2.5 76 1 0 -1 -0.9

SEN ACHMEA 0.875% 17 Sep 18 --/A-/A FSV 101.13 -0.1 1.1 10 2 1 -7 -0.9

SEN BFCM 0.25% 14 Jun 19 Aa3/A/A+ BAK 100.782 -0.2 1.9 0 2 0 -8 -0.9

SEN CS 1.375% 29 Nov 19 A1/A/A BAK 103.36 -0.1 2.3 4 2 1 -9 -0.9

SEN BBVASM 2.375% 22 Jan 19 Baa1/BBB+/A- BAK 103.686 -0.1 1.5 7 4 3 -10 -0.9

SEN SEB 2% 18 Mar 19 Aa3/A+/AA- BAK 103.557 -0.2 1.6 0 3 0 -11 -0.9

SEN DB 1% 18 Mar 19 Baa2/BBB-/A- BAK 101.618 0 1.6 19 2 0 -8 -0.9

SEN ICADFP 1.125% 17 Nov 25 --/BBB+/-- RES 98.826 1.3 7.8 59 1 -1 -7 -0.9

SEN BHH 1% 29 Oct 21 A1/--/A+ BAK 103.37 0.2 4.1 5 1 -2 -9 -1

HYBRID DBOERS 2.75% 05 Feb 41 --/A+/-- FSV 106.047 1 3.3 96 0 -2 0 -1

SEN INVSA 4.875% 18 Nov 21 Aa3/AA-/-- FSV 120.37 0.1 3.9 -4 2 1 -16 -1

LT2 LBBER 5.875% 25 Nov 19 Baa1/--/-- BAK 112.078 0.6 2.1 75 4 2 -9 -1

LT2 NAB 4.625% 10 Feb 20 A3/BBB+/A+ BAK 111.255 0.1 2.4 24 1 -4 -9 -1

SEN INTNED 3.25% 03 Apr 19 A1/A+/A+ BAK 105.755 -0.2 1.6 -2 2 1 -8 -1

SEN BNP 1.375% 21 Nov 18 A1/A/A+ BAK 102.09 -0.2 1.3 -1 0 -1 -4 -1

SEN UCGIM 3.625% 24 Jan 19 Baa1/BBB-/BBB BAK 105.496 -0.1 1.4 10 3 0 -9 -1

SEN ERSTBK 1.875% 13 May 19 A3/A-/A- BAK 103.412 -0.1 1.8 13 2 1 -10 -1

SEN STANLN 1.625% 20 Nov 18 A2/BBB+/A+ BAK 102.306 -0.2 1.3 7 1 1 -8 -1

HYBRID ANNGR 4.625% 08 Apr 74 --/BBB-/-- RES 105.958 1 1.6 124 -3 -9 -14 -1

SEN BREPW 2.375% 01 Apr 19 --/BBB+/BBB BAK 103.813 0.1 1.6 26 -2 -7 -2 -1

SEN UCGIM 1.5% 19 Jun 19 Baa1/BBB-/BBB BAK 102.965 -0.1 1.9 9 2 1 -10 -1

SEN PZUPW 1.375% 03 Jul 19 --/BBB+/-- INN 102.27 0.2 1.9 35 -4 -4 0 -1

SEN BREPW 2% 26 Nov 21 --/BBB+/BBB BAK 105.825 0.6 4.1 47 1 1 -1 -1





SURVIVAL CDS TRADES

Debt

Issuer (Ticker)

Rating

iBoxx Sector 1Y Mid

1d change

1w change

1m change

60d Z-Score

SNRFOR de Volksbank (DEVOBA) Baa1/A-/BBB+ BAK 207 2.6 38.5 38.6 3.75

SUBLT2 de Volksbank (DEVOBA) Baa3/BBB-/BBB BAK 311 3.9 57.8 57.9 3.7

SUBLT2 Nordea (NDASS) Baa1/A-/A+ BAK 47 0 14.1 14.7 2.78

SNRFOR BNP Paribas (BNP) A1/A/A+ INN 11 0.4 0.8 2.2 1.66

SNRFOR Bankinter (BKTSM) Baa2/BBB/-- SIC 73 -0.5 -1.3 13.9 1.41

SNRFOR Nordea (NDASS) Aa3/AA-/AA- BAK 9 0 2.3 0.6 1.06

SNRFOR IBK (INDKOR) Aa2/AA/AA- BAK 21 0.4 1.2 3.6 1.02

SNRFOR Credit Suisse (CS) Baa2/BBB+/A- BAK 19 -0.5 -0.4 3 1.01

SUBLT2 Swedbank (SWEDA) Baa1/A-/A+ BAK 40 -7.4 9.6 13.3 0.99

SUBLT2 NN Group (NNGRNV) Baa3/BBB*-/BBB INN 68 -0.4 1 6.1 0.94

SUBLT2 BNP Paribas (BNP) Baa2/BBB+/BBB INN 32 0.7 2.1 4.4 0.93

SNRFOR SCOR (SCOR) --/AA-/A+ INN 13 0.7 0.7 2.6 0.86

SNRFOR NIBC Bank NV (NIBCAP) Baa1/BBB-/BBB- BAK 105 13.4 12.5 12.5 0.81

SNRFOR Bank of Nova Scotia (BNS) A1/A+/AA- BAK 19 0 0.8 2.8 0.73

SNRFOR Deutsche Bank (DB) Baa2/A-/A- SIC 28 0.5 1.7 4.9 0.62

SNRFOR SEB (SEB) Aa3/A+/AA- BAK 7 -0.9 0.8 2.7 0.49

SNRFOR Berkshire Hathaway (BRK) Aa2/AA*-/A+ FSV 12 0.1 0 1 0.44

SUBLT2 LBBW (LBBW) Baa2/--/BBB OEP 150 -0.3 2.8 5.8 0.42

SNRFOR Danske Bank (DANBNK) A2/A/A BAK 10 -0.2 -0.1 0 0.4

SNRFOR AON (AON) Baa2/A-/BBB+ INN 11 0 -0.1 0 0.39

SUBLT2 Aviva (AVLN) Baa1*+/BBB/BBB+ INN 40 -0.7 -2 5 0.38

SUBLT2 Emirates NBD (EBIUH) Baa2/--/-- BAK 84 0 -16 -7.6 0.35

SNRFOR Investor AB (INVSA) Aa3/AA-/-- FSV 9 0 0.3 0 0.29

SUBLT2 SCOR (SCOR) A2/A-/A- INN 46 2.4 33.4 -3.7 0.29

SUBLT2 Nationwide (NWIDE) Baa1/--/A- BAK 62 0.1 6.4 19.9 0.28

SUBLT2 DNB (DNBNO) Baa1/A-/-- BAK 30 -0.3 3.5 1.6 0.26

SUBLT2 SEB (SEB) Baa1/BBB+/A+ BAK 28 -3.7 3.7 9.8 0.25

SNRFOR American Tower (AMT) Baa3/BBB-/BBB RES 60 0 0 0 0.22

SUBLT2 Société Générale (SOCGEN) Baa3/--/A- BAK 30 1.3 1.8 -1.1 0.21

SNRFOR Aegon (AEGON) A3/A-/BBB+ INN 27 0 2.2 0 0.17

SUBLT2 Banco Popular Espanol (POPSM) C/--/-- SIC 62128 340.9 2311.5 -375.2 0.16

SUBLT2 ABN Amro Bank (ABNANV) Baa2/BBB-/A- BAK 71 0 0 0 0.14

SNRFOR ABN Amro Bank (ABNANV) A1/A/A+ BAK 36 0 0 0 0.13

SUBLT2 Bank of America (BAC) Baa3/BBB/A- BAK 31 0.3 0.6 1.5 0.09

SUBLT2 Macquarie (MQGAU) Baa2/BBB/A- BAK 32 1 -1.4 0 0.08

SNRFOR Commerzbank (CMZB) Baa1/A-/BBB+ OEP 20 -0.1 0.6 0 0.05

SNRFOR Metropolitan Life (MET) A3/A-/A- INN 9 0.3 0.7 -0.3 0.02

SNRFOR DNB (DNBNO) Aa2/A+/-- BAK 9 -0.1 1 -0.3 0.01

SUBLT2 Morgan Stanley (MS) Baa2/BBB+/A- BAK 36 0.5 0.5 1.1 -0.04

SNRFOR LBBW (LBBW) A1/--/A- OEP 32 -0.1 0.6 1.2 -0.06

SNRFOR Toronto-Dominion Bank (TD) Aa2/AA-/AA- BAK 24 0.2 -0.1 -0.4 -0.06

SUBLT2 Crédit Agricole (ACAFP) Baa2/BBB/A INN 28 -0.1 0 -1 -0.06

SNRFOR Crédit Agricole (ACAFP) A1/A/A+ INN 9 -0.1 0.2 0.3 -0.11

SNRFOR Erste Bank (ERSTBK) A3/A-/A- BAK 28 -0.6 6.2 6.2 -0.18

SNRFOR Svenska Handelsbanken (SHBASS) Aa2/AA-/AA BAK 5 0 0 1.5 -0.18

SNRFOR Emirates NBD (EBIUH) BAK 29 0 -6.5 -5.3 -0.18

SNRFOR Wells Fargo & Co (WFC) A2/A/AA- BAK 11 0.2 -0.1 0.3 -0.2

SNRFOR Nationwide (NWIDE) Aa3/A/A+ BAK 12 0 1.3 2.5 -0.22

SNRFOR UBS (UBS) --/A-/A BAK 7 -0.1 0.7 0.7 -0.23

SNRFOR Prudential (PRUFIN) A2/A+/A 18 -0.4 0.9 0.8 -0.25





BASIS TRADES

Debt

Issuer (Bond)

CDS Duration

Bond Rating

iBoxx Sector

CDS Spread

Z-Spread Basis

60d Z-Score

LT2 de Volksbank (DEVOBA 3.75% Nov-25) 3 Baa3/BBB-/BBB BAK 397 96 302 3.56

SEN Wells Fargo & Co (WFC 1% Feb-27) 9.5 A2/A/AA- BAK 70 49 22 2.79

SEN Wells Fargo & Co (WFC 1.5% May-27) 9.5 A2/A/AA- BAK 70 49 21 2.77

SEN Wells Fargo & Co (WFC 2% Apr-26) 8.5 A2/A/AA- BAK 65 48 17 2.71

SEN Wells Fargo & Co (WFC 1.375% Oct-26) 9 A2/A/AA- BAK 68 47 21 2.52

SEN LBBW (LBBW 0.5% Jun-22) 4.5 A1/--/A- BAK 53 18 35 2.32

LT2 Société Générale (SOCGEN 2.625% Feb-25) 7.5 Baa3/--/A- BAK 141 95 46 2.23

LT2 BNP Paribas (BNP 2.875% Mar-26) 3.5 Baa2/BBB+/A BAK 77 62 14 2.22

LT2 BNP Paribas (BNP 2.625% Oct-27) 5 Baa2/BBB+/A BAK 106 81 25 2.21

SEN Morgan Stanley (MS 1.875% Apr-27) 9.5 A3/BBB+/A BAK 97 78 20 2.21

LT2 Deutsche Bank (DB 5% Jun-20) 3 --/BB+/BBB+ BAK 109 87 22 2.18

SEN Deutsche Bank (DB 1.125% Mar-25) 7.5 Baa2/BBB-/A- BAK 103 46 57 2.18

LT2 ABN Amro Bank (ABNANV 7.125% Jul-22) 5 --/BBB-/A- BAK 153 60 93 2.14

SEN Wells Fargo & Co (WFC 1.625% Jun-25) 7.5 A2/A/AA- BAK 61 38 23 2.11

LT2 Société Générale (SOCGEN 2.5% Sep-26) 4 Baa3/--/A- BAK 89 81 8 2.09

LT2 ABN Amro Bank (ABNANV 2.875% Jan-28) 5.5 Baa2/BBB-/A- BAK 162 89 73 2.08

SEN Nomura (NOMURA 1.125% Jun-20) 2.5 --/A-/-- BAK 22 11 11 2.02

LT2 Commerzbank (CMZB 4% Mar-27) 9.5 Ba1/BBB-/BBB BAK 213 186 27 2.01

LT2 BNP Paribas (BNP 2.375% Feb-25) 7.5 Baa2/BBB+/A BAK 136 93 43 2.01

LT2 ABN Amro Bank (ABNANV 2.875% Jun-25) 3 Baa2/BBB-/A- BAK 106 60 45 2.01


NEGATIVE BASIS TRADES

Debt

Issuer (Bond)

CDS Duration

Bond Rating

iBoxx Sector

CDS Spread

Z-Spread Basis

60d Z-Score

LT2 Commonwealth Bank of Australia (CBAAU 2% Apr-27) 4.5 Baa1/BBB/-- BAK 85 101 -16 -0.64

LT2 Standard Chartered (STANLN 3.125% Nov-24) 7 Baa1/BBB-/A- BAK 84 119 -35 -0.34

LT2 Standard Chartered (STANLN 3.625% Nov-22) 5 Baa1/BBB-/A- BAK 71 101 -30 -0.3

LT2 BBVA (BBVASM 3.5% Apr-24) 1.5 Baa3/BBB-/BBB+ BAK 40 49 -9 -0.28

LT2 ING (INTNED 2.5% Feb-29) 6.5 Baa2/BBB/A BAK 74 109 -35 -0.12

LT2 ING (INTNED 3.5% Nov-23) 1 Baa2/BBB+/A BAK 12 34 -22 -0.1

SEN UBS (UBS 2.125% Mar-24) 6.5 Baa1/A-/A BAK 37 44 -7 -0.01

LT2 HSBC (HSBC 6% Jun-19) 1.5 A2/BBB+/A+ BAK 17 23 -6 0.12

LT2 Lloyds Banking Group (LLOYDS 4.5% Mar-30) 7.5 Baa2*+/BBB-/A- BAK 92 133 -40 0.12

LT2 ING (INTNED 3% Apr-28) 5.5 Baa2/BBB/A BAK 63 101 -38 0.2

LT2 SEB (SEB 1.375% Oct-28) 6 Baa1/BBB+/A+ BAK 66 84 -18 0.21

LT2 DNB (DNBNO 3% Sep-23) 1 --/A-/-- BAK 30 39 -10 0.27

SEN UBS (UBS 1.5% Nov-24) 6 Baa1/A-/A BAK 33 43 -10 0.35

LT2 HSBC (HSBC 3.375% Jan-24) 1.5 A2/BBB+/A+ BAK 17 30 -13 0.38

LT2 Rabobank (RABOBK 2.5% May-26) 3.5 A3/BBB+/A BAK 48 75 -27 0.41

LT2 Barclays (BACR 6% Jan-21) 3.5 Baa3/BBB-/A- BAK 55 69 -14 0.49

LT2 SEB (SEB 2.5% May-26) 3.5 Baa1/BBB+/A+ BAK 47 72 -24 0.56

LT2 ING (INTNED 3.625% Feb-26) 3.5 Baa2/BBB+/A BAK 37 57 -20 0.56

LT2 Danske Bank (DANBNK 2.75% May-26) 3.5 --/BBB+/A- BAK 56 62 -6 0.64

SEN RBS (RBS 2% Mar-23) 4.5 Baa3/BBB-/BBB+ BAK 45 87 -42 0.64





CAPITAL STRUCTURE TRADES

Debt

Issuer (Bond)

CDS Duration

Bond Rating

iBoxx Sector

SEN CDS

Z-Spread

Sen Sub Ratio

60d Z-Score

LT2 Commonwealth Bank of Australia (CBAAU 2% Apr-27) 4.5 Baa1/BBB/-- BAK 43 101 2.35 1.04

LT2 Commonwealth Bank of Australia (CBAAU 5.5% Aug-19) 2 A3/BBB+/A+ BAK 17 24 1.43 0.64

LT2 Aust. & NZ. Banking Group (ANZ 5.125% Sep-19) 2 A3/BBB+/A+ BAK 17 23 1.37 0.61

LT2 Swedbank (SWEDA 2.375% Feb-24) 1.5 Baa1/A-/A+ BAK 7 37 5.15 0.28

LT2 National Australia Bank (NAB 4.625% Feb-20) 2.5 A3/BBB+/A+ BAK 21 23 1.08 0.25

LT2 Swedbank (SWEDA 1% Nov-27) 5 Baa1/A-/A+ BAK 27 78 2.9 0.25

LT2 Standard Chartered (STANLN 3.625% Nov-22) 5 Baa1/BBB-/A- BAK 39 101 2.63 0.2

LT2 Standard Chartered (STANLN 3.125% Nov-24) 7 Baa1/BBB-/A- BAK 53 119 2.23 0.16

LT2 BBVA (BBVASM 3.5% Apr-24) 1.5 Baa3/BBB-/BBB+ BAK 16 49 3.13 0.11

LT2 National Australia Bank (NAB 2% Nov-24) 2 Baa1/BBB/A+ BAK 17 74 4.34 0.11

T2 perpetual Crédit Agricole (ACAFP 4.25%) 7.5 --/BBB-/-- INN 49 234 4.76 0.09

T2 perpetual Crédit Agricole (ACAFP 4.5%) 8 --/BBB-/-- INN 51 242 4.73 0.05

LT2 Rabobank (RABOBK 4.125% Sep-22) 5 A3/BBB+/A BAK 28 53 1.91 0.03

LT2 Sumitomo Mitsui (SUMIBK 4% Nov-20) 3 A2/A-/-- BAK 20 27 1.33 -0.01

LT2 ING (INTNED 2.5% Feb-29) 6.5 Baa2/BBB/A BAK 36 109 3.02 -0.02

LT2 ING (INTNED 3% Apr-28) 5.5 Baa2/BBB/A BAK 29 101 3.45 -0.16

LT2 DNB (DNBNO 1.25% Mar-27) 4.5 --/A-/-- BAK 29 61 2.12 -0.22

LT2 Rabobank (RABOBK 2.5% May-26) 3.5 A3/BBB+/A BAK 20 75 3.85 -0.23

LT2 Banco Santander (SANTAN 3.25% Apr-26) 8.5 Baa2/BBB/BBB+ BAK 69 137 1.98 -0.24

LT2 Rabobank (RABOBK 3.75% Nov-20) 3 A3/BBB+/A BAK 17 24 1.42 -0.26


CAPITAL STRUCTURE TRADES

Debt

Issuer (Bond)

CDS Duration

Bond Rating

iBoxx Sector

SEN CDS

Z-Spread

Sen Sub Ratio

60d Z-Score

LT2 de Volksbank (DEVOBA 3.75% Nov-25) 3 Baa3/BBB-/BBB BAK 265 96 0.36 -3.32

T2 dated ZFS (ZURNVX 3.5% Oct-46) 9 A2/A/A- INN 53 117 2.2 -2.7

T2 dated Assicurazioni Generali (ASSGEN 5.5% Oct-47) 10 Baa3/--/BBB INN 119 248 2.1 -2.47

T2 dated SCOR (SCOR 3% Jun-46) 8.5 --/A/A- INN 76 121 1.59 -2.39

T2 dated ZFS (ZURNVX 4.25% Oct-43) 6 A2/A/A- INN 38 89 2.32 -2.35

LT2 ABN Amro Bank (ABNANV 7.125% Jul-22) 5 --/BBB-/A- BAK 77 60 0.79 -2.33

T2 dated Assicurazioni Generali (ASSGEN 10.125% Jul-42) 5 Baa3/--/BBB INN 78 141 1.81 -2.24

LT2 Deutsche Bank (DB 5% Jun-20) 3 --/BB+/BBB+ BAK 54 87 1.6 -2.21

LT2 Commerzbank (CMZB 4% Mar-27) 9.5 Ba1/BBB-/BBB BAK 101 186 1.84 -2.2

T2 perpetual NN Group (NNGRNV 4.5%) 8.5 Baa3/BBB-/BBB INN 80 39 0.49 -2.18

LT2 ABN Amro Bank (ABNANV 2.875% Jan-28) 5.5 Baa2/BBB-/A- BAK 81 89 1.09 -2.16

T2 dated NN Group (NNGRNV 4.625% Apr-44) 6.5 Baa3/BBB-/BBB INN 73 198 2.7 -2.13

T2 dated AXA (AXASA 3.375% Jul-47) 10 A3/BBB+/BBB INN 58 131 2.27 -2.12

T2 dated Allianz (ALVGR 3.099% Jul-47) 10 A2/A+/A INN 49 120 2.45 -2.11

T2 dated AXA (AXASA 5.25% Apr-40) 2.5 A3/BBB+/BBB INN 17 46 2.69 -2.11

LT2 ABN Amro Bank (ABNANV 2.875% Jun-25) 3 Baa2/BBB-/A- BAK 53 60 1.14 -2.1

T2 dated Allianz (ALVGR 2.241% Jul-45) 8 A2/A+/A INN 41 112 2.71 -2.1

LT2 Commerzbank (CMZB 4% Mar-26) 8.5 Ba1/BBB-/BBB BAK 96 187 1.95 -2.09

T2 dated Aviva (AVLN 3.875% Jul-44) 7 Baa1*+/BBB/BBB+ INN 70 173 2.46 -2.08

T2 perpetual Allianz (ALVGR 3.375%) 7 A2/A+/A INN 37 135 3.64 -2.08





Rating changes We have seen quite a few rating changes, with a mixed picture.

Rating Date Issuer Agency action Rating type From To

02-Aug-17 Nationwide (NWIDE) Moody's upgrade Outlook NEG STA

Lloyds Banking Group (LLOYDS) Moody's watch positive Sen. Unsec. Baa1 Baa1*+

watch positive Sub. Debt Baa2 Baa2*+

Leeds Building Society (LEED) Moody's downgrade Sen. Unsec. A2 A3

downgrade Sub. Debt Baa1 Baa2

upgrade Outlook NEG STA

Coventry Building Society (COVBS) Moody's upgrade Outlook NEG STA

28-Jul-17 Landesbank Berlin (LBBER) Moody's upgrade Sub. Debt Baa2 Baa1

Berlin Hyp (BHH) Moody's upgrade Sen. Unsec. A2 A1

upgrade Sub. Debt Baa3 Baa1

downgrade Outlook POS STA

26-Jul-17 Erste Bank (ERSTBK) Moody's upgrade Sen. Unsec. Baa1 A3

upgrade Sub. Debt Ba1 Baa3

upgrade Outlook STA POS

24-Jul-17 Citycon (CITCON) Moody's downgrade Outlook STA NEG

12-Jul-17 Banca MPS (MONTE) Moody's remove watch Sen. Unsec. B3* B3

remove watch Sub. Debt Ca* Ca

10-Jul-17 SpareBank 1 SMN (MINGNO) Moody's downgrade Outlook STA NEG

07-Jul-17 Landsbankinn (LANBNN) Fitch upgrade Sen. Unsec. BBB+ A-

Islandsbanki (ISLBAN) Fitch upgrade Sen. Unsec. BBB+ A-

Berkshire Hathaway (BRK) S&P watch negative Issuer AA AA*-

05-Jul-17 Gazprombank (GPBRU) S&P upgrade Outlook NEG STA

30-Jun-17 Nord/LB (NDB) Moody's downgrade Sen. Unsec. Baa2*- Baa3

downgrade Sub. Debt Ba3*- B1

29-Jun-17 BlackRock (BLK) Moody's upgrade Outlook STA POS

27-Jun-17 Banco de Sabadell (SABSM) S&P upgrade Issuer BB+ BBB-

26-Jun-17 Gecina (GFCFP) Moody's downgrade Outlook STA NEG

23-Jun-17 Bank of Cyprus (BOCYCY) Moody's downgrade Sen. Unsec. B2*- Caa1

22-Jun-17 Credito Valtellinese (CVALIM) Fitch downgrade Sen. Unsec. BB*- BB-

downgrade Sub. Debt BB-*- B+

19-Jun-17 Westpac (WSTP) Moody's downgrade Sen. Unsec. Aa2 Aa3

downgrade Sub. Debt A2 A3


National Australia Bank (NAB) Moody's downgrade Sen. Unsec. Aa2 Aa3



Commonwealth Bank of Australia (CBAAU) Moody's downgrade Sen. Unsec. Aa2 Aa3



Aviva (AVLN) Moody's watch positive Sen. Unsec. A3 A3*+

watch positive Sub. Debt Baa1 Baa1*+

Aust. & NZ. Banking Group (ANZ) Moody's downgrade Sen. Unsec. Aa2 Aa3



ASB Bank (ASBBNK) Moody's downgrade Sen. Unsec. Aa3 A1



ANZ Bank New Zealand Limited (ANZNZ) Moody's downgrade Sen. Unsec. Aa3 A1






RECENT RATING CHANGES (CONTINUED)

Rating Date Issuer Agency action Rating type From To

15-Jun-17 RBS (RBS) Moody's upgrade Sub. Debt Ba2 Ba1

12-Jun-17 Banco Popular Espanol (POPSM) S&P upgrade Issuer B+ BBB+

upgrade Outlook STA POS

09-Jun-17 Banco Popular Espanol (POPSM) Fitch upgrade Sen. Unsec. B+ A-

downgrade Sub. Debt B WD

downgrade Outlook DEVELOP STA

08-Jun-17 IPF (IPFLN) Fitch downgrade Sen. Unsec. BB+*- BB

Banco Popular Espanol (POPSM) Moody's upgrade Sen. Unsec. Ba2 Ba1*+

downgrade Sub. Debt B2 C

07-Jun-17 Mapfre (MAPSM) Fitch upgrade Sen. Unsec. BBB BBB+

de Volksbank (DEVOBA) S&P upgrade Issuer BBB+ A-

06-Jun-17 Bank of Ireland (BKIR) Moody's upgrade Sub. Debt Ba2 Ba1

Allied Irish Banks (AIB) Moody's upgrade Sen. Unsec. Baa3 Baa2

upgrade Sub. Debt C Ba2

AIG (AIG) S&P downgrade Outlook STA NEG

Source: rating agencies, Bloomberg, UniCredit Research




Event calendar

The 2Q17 earnings season is coming to an end, with some insurance companies and German Landesbanks left to report results.

Company Country Date Event

BNP PARIBAS FORTIS SA- AUC FR 7-Aug-17 S1

STANDARD LIFE PLC GB 8-Aug-17 S1

MUENCHENER RUECKVER AG-REG DE 9-Aug-17 Q2

AGEAS BE 9-Aug-17 Q2

TURKIYE VAKIFLAR BANKASI T-D TR 9-Aug-17 Q2

SPAREBANK 1 SR BANK NO 9-Aug-17 Q2

LEGAL & GENERAL GROUP PLC GB 9-Aug-17 S1

COMMONWEALTH BANK OF AUSTRAL AU 9-Aug-17 Y

HANNOVER RUECK SE DE 10-Aug-17 Q2

ZURICH INSURANCE GROUP AG CH 10-Aug-17 S1

AEGON NV NL 10-Aug-17 S1

AAREAL BANK AG DE 10-Aug-17 Q2

RAIFFEISEN BANK INTERNATIONAL AT 10-Aug-17 Q2

PRUDENTIAL PLC GB 10-Aug-17 S1

OLD MUTUAL PLC GB 11-Aug-17 S1

FEDERATION DES CAISSES DESJA CA 11-Aug-17 S1

BANCA MONTE DEI PASCHI SIENA IT 14-Aug-17 S1

TALANX AG DE 14-Aug-17 Q2

SWISS LIFE HOLDING AG-REG CH 16-Aug-17 S1

NYKREDIT REALKREDIT A/S DK 17-Aug-17 Q2

ROYAL BANK OF CANADA CA 23-Aug-17 Q3

CAN IMPERIAL BK OF COMMERCE CA 25-Aug-17 Q3

ALFA-BANK AO LU 28-Aug-17 S1

BANK OF MONTREAL CA 29-Aug-17 Q3

BANK OF NOVA SCOTIA CA 29-Aug-17 Q3

ALPHA BANK AE GR 30-Aug-17 Q2

NATIONAL BANK OF CANADA CA 30-Aug-17 Q3

DEXIA SA BE 31-Aug-17 S1

TORONTO-DOMINION BANK CA 31-Aug-17 Q3

EUROBANK ERGASIAS SA GR 31-Aug-17 Q2

NATIONAL BANK OF GREECE GR 31-Aug-17 Q2

JPMORGAN CHASE & CO US 12-Oct-17 Q3

CITIGROUP INC US 12-Oct-17 Q3

WELLS FARGO & CO US 13-Oct-17 Q3

BANK OF AMERICA CORP US 13-Oct-17 Q3

GOLDMAN SACHS GROUP INC US 17-Oct-17 Q3

SVENSKA HANDELSBANKEN-A SHS SE 18-Oct-17 Q3

MORGAN STANLEY US 18-Oct-17 Q3

BANKINTER SA ES 20-Oct-17 Q3

AKBANK T.A.S. TR 20-Oct-17 Q3

SKANDINAVISKA ENSKILDA BAN-A SE 25-Oct-17 Q3

SWEDBANK AB - A SHARES SE 25-Oct-17 Q3

LLOYDS BANKING GROUP PLC GB 25-Oct-17 Q3

BANCO BILBAO VIZCAYA ARGENTA ES 25-Oct-17 Q3

DNB ASA NO 26-Oct-17 Q3

NORDEA BANK AB SE 26-Oct-17 Q3

BANCO BPI SA.- REG SHS ES 26-Oct-17 Q3

BANCO SANTANDER SA ES 26-Oct-17 Q3

DEUTSCHE BANK AG-REGISTERED DE 26-Oct-17 Q3

SCOR NON REGR FR 26-Oct-17 Q3

BARCLAYS PLC GB 26-Oct-17 Q3





Company Country Date Event

AUST AND NZ BANKING GROUP AU 26-Oct-17 Y

BANCO DE SABADELL SA ES 27-Oct-17 Q3

OVERSEA-CHINESE BANKING CORP SG 27-Oct-17 Q3

UNITED OVERSEAS BANK LTD SG 27-Oct-17 Q3

UNITED OVERSEAS BANK LTD SG 27-Oct-17 Q3

CAIXABANK S.A ES 27-Oct-17 Q3

UBS GROUP AG-REG CH 27-Oct-17 Q3

BANKIA SA ES 30-Oct-17 Q3

HSBC HOLDINGS PLC GB 30-Oct-17 Q3

BNP PARIBAS FR 31-Oct-17 Q3

AMERICAN INTERNATIONAL GROUP US 31-Oct-17 Q3

TURKIYE IS BANKASI-C TR 1-Nov-17 Q3

DANSKE BANK A/S DK 2-Nov-17 Q3

CREDIT SUISSE GROUP AG-REG CH 2-Nov-17 Q3

ING GROEP NV NL 2-Nov-17 Q3

NATIONAL AUSTRALIA BANK LTD AU 2-Nov-17 Y

SOCIETE GENERALE SA FR 3-Nov-17 Q3

WESTPAC BANKING CORP AU 6-Nov-17 Y

INTESA SANPAOLO IT 7-Nov-17 Q3

NATIXIS FR 7-Nov-17 Q3

CNP ASSURANCES FR 8-Nov-17 Q3

COMMERZBANK AG DE 9-Nov-17 Q3

ASSICURAZIONI GENERALI IT 9-Nov-17 Q3

MAPFRE SA ES 10-Nov-17 Q3

BANCO COMERCIAL PORTUGUES-R PT 13-Nov-17 Q3

RSA INSURANCE GROUP PLC GB 22-Feb-18 Y

STANDARD CHARTERED PLC GB 23-Feb-18 Y

ALLIED IRISH BANKS PLC IE 2-Mar-18 Y

PERMANENT TSB GROUP HOLDINGS IE 8-Mar-18 Y

DNB BANK ASA NO 27-Apr-18 Q1

IKB DEUT INDUSTRIEBANK AG US 8-Jun-18 Y

S1 = 1H Source: Bloomberg, company data, UniCredit Research



UniCredit Research page 29 .

Disclaimer Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but for the completeness and accuracy of which we assume no liability. All estimates and opinions and projections and forecasts included in the report represent the independent judgment of the analysts as of the date of the issue unless stated otherwise. This report may contain links to websites of third parties, the content of which is not controlled by UniCredit Bank. No liability is assumed for the content of these third-party websites. We reserve the right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice.

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POTENTIAL CONFLICTS OF INTERESTS

Aareal Bank 3; ABN Amro Bank 3; Allianz 8a; Allied Irish Banks 3; Assicurazioni Generali 3, 8a; Aust. & NZ. Banking Group 3; AXA 3, 8a; Banco Popular Espanol 3; Banco Santander 8a; Bank of America 3; Bankinter 3; Barclays 3; BBVA 3, 8a; BNP Paribas 8a; Citigroup 3; Commerzbank 8a; Credit Suisse 2; Danske Bank 3; Deutsche Bank 2, 3, 8a; DNB 3; Exor 3; General Electric 3; Goldman Sachs 3; HSBC 3; ING 8a; Intesa Sanpaolo 3, 8a; Landesbank Berlin 3; Lloyds Banking Group 3; Mediobanca 1a, 3, 6a; Munich Re 8a; Raiffeisen Bank Int. 3; SEB 3; Société Générale 3, 8a; Svenska Handelsbanken 3; Swedbank 3; UBI Banca 3; UBS 3; Unibail-Rodamco 8a; UniCredit 2, 3; UniCredit Bank Austria 3; Veneto Banca 3; Wells Fargo & Co 3

Key 1a: UniCredit Bank AG and/or any related legal person owns at least 2% of the capital stock of the analyzed company.

Key 1b: The analyzed company owns at least 2% of the capital stock of UniCredit Bank AG and/or any related legal person.

Key 2: UniCredit Bank AG and/or any related legal person has been lead manager or co-lead manager over the previous 12 months of any publicly disclosed offer of financial instruments of the analyzed company, or in any related derivatives.

Key 3: UniCredit Bank AG and/or any related legal person administers the securities issued by the analyzed company on the stock exchange or on the market by quoting bid and ask prices (i.e. acts as a market maker or liquidity provider in the securities of the analyzed company or in any related derivatives).

Key 5: The analyzed company and UniCredit Bank AG and/or any related legal person have concluded an agreement on the preparation of analyses.

Key 6a: Employees or members of the Board of Directors of UniCredit Bank AG and/or any other employee that works for UniCredit Research (i.e. the joint research department of the UniCredit Group) and/or members of the Group Board (pursuant to relevant domestic law) are members of the Board of Directors of the analyzed company. Members of the Board of Directors of the analyzed company hold office in the Board of Directors of UniCredit Bank AG (pursuant to relevant domestic law). The application of this Key 6a is limited to persons who, although not involved in the preparation of the analysis, had or could reasonably be expected to have access to the analysis prior to its dissemination to customers or the public.

Key 6b: The analyst is on the Supervisory Board/Board of Directors of the company they cover.

Key 8a: UniCredit Bank AG and/or any related legal person hold a net long position exceeding 0.5% of the total issued share capital of the issuer.

Key 8b: UniCredit Bank AG and/or any related legal person hold a net short position exceeding 0.5% of the total issued share capital of the issuer.

UniCredit S.p.A. acts as a Specialist or a Primary Dealer in government bonds issued by the Italian or Greek Treasury, and as market maker in government bonds issued by the Spain or Portuguese Treasury. Main tasks of the Specialist are to participate with continuity and efficiency to the governments' securities auctions, to contribute to the efficiency of the secondary market through market making activity and quoting requirements and to contribute to the management of public debt and to the debt issuance policy choices, also through advisory and UniCredit Bank AG research activities. UniCredit S.p.A. Registered Office in Rome: Via Alessandro Specchi, 16 - 00186 Roma Head Office in Milan: Piazza Gae Aulenti 3 - Tower A - 20154 Milano, Registered in the Register of Banking Groups and Parent Company of the UniCredit Banking Group, with. cod. 02008.1; Cod. ABI 02008.1 - Competent Authority: Commissione Nazionale per le Società e la Borsa (CONSOB)”. UniCredit Bank AG acts as a Specialist or Primary Dealer in government bonds issued by the German or Austrian Treasury. Main tasks of the Specialist are to participate with continuity and efficiency to the governments' securities auctions, to contribute to the efficiency of the secondary market through market making activity and quoting requirements and to contribute to the management of public debt and to the debt issuance policy choices, also through advisory and research activities.

RECOMMENDATIONS, RATINGS AND EVALUATION METHODOLOGY

Company Date Rec. Company Date Rec. Company Date Rec. ACAFP 25/05/2017 Marketweight CS 27/06/2017 Marketweight MS 08/05/2017 Marketweight ACAFP 25/04/2017 Restricted CS 28/04/2017 Restricted MS 24/04/2017 Restricted ACAFP 03/02/2017 Marketweight CS 14/02/2017 Marketweight MS 16/11/2016 Marketweight ACAFP 28/12/2016 Restricted CS 24/01/2017 Restricted MS 25/10/2016 Restricted ACHMEA 03/02/2017 Coverage in transition DB 27/07/2017 Overweight NDB 28/10/2016 Marketweight AEGON 03/02/2017 Coverage in transition DB 18/04/2017 Marketweight NDB 26/09/2016 Restricted AEGON 11/11/2016 Marketweight DB 13/03/2017 Restricted NNGRNV 03/02/2017 Coverage in transition AIG 03/02/2017 Coverage in transition DB 06/03/2017 Marketweight PBBGR 07/04/2017 Marketweight ANNGR 27/07/2017 Overweight DB 06/03/2017 Restricted PBBGR 23/01/2017 Restricted ANNGR 03/02/2017 Marketweight DLNA 03/02/2017 Coverage in transition POPSM 07/06/2017 Overweight ANNGR 29/11/2016 Restricted DVB 03/03/2017 Marketweight POPSM 03/02/2017 Underweight AOXGR 27/07/2017 Overweight DVB 16/01/2017 Restricted RABOBK 19/08/2016 Marketweight ASSGEN 31/05/2017 Marketweight DVB 28/10/2016 Marketweight RBS 08/08/2016 Underweight AVLN 03/02/2017 Coverage in transition EXOIM 19/10/2016 Marketweight SCOR 03/02/2017 Coverage in transition BAC 08/05/2017 Marketweight EXOIM 26/09/2016 Overweight SLHNVX 03/02/2017 Coverage in transition BAC 21/04/2017 Restricted GE 31/10/2016 No recommendation SOCGEN 06/06/2017 Marketweight BBVASM 08/05/2017 Marketweight GS 27/06/2017 Marketweight SOCGEN 12/05/2017 Restricted BBVASM 03/04/2017 Restricted GS 10/05/2017 Restricted SOCGEN 03/02/2017 Marketweight BFCM 15/03/2017 Marketweight HSBC 07/04/2017 Marketweight SOCGEN 14/12/2016 Restricted




Company Date Rec. Company Date Rec. Company Date Rec. BHH 27/06/2017 Marketweight HSBC 21/03/2017 Restricted SOCGEN 03/11/2016 Marketweight BHH 16/05/2017 Restricted INTNED 07/03/2017 Marketweight SOCGEN 16/08/2016 Restricted BHH 18/04/2017 Marketweight INTNED 08/02/2017 Restricted SRENVX 03/02/2017 Coverage in transition BHH 15/02/2017 Restricted INTNED 02/02/2017 Marketweight TD 13/12/2016 Marketweight BHH 28/10/2016 Marketweight INTNED 16/11/2016 Restricted UBS 31/01/2017 Marketweight BNP 07/07/2017 Marketweight ISPIM 02/06/2017 Marketweight UBS 23/11/2016 Restricted BNP 19/06/2017 Restricted ISPIM 31/05/2017 Restricted ULFP 27/07/2017 Marketweight BNP 06/06/2017 Marketweight JPM 14/07/2017 Marketweight ZURNVX 03/02/2017 Coverage in transition BNP 10/05/2017 Restricted JPM 11/05/2017 Restricted BNS 13/12/2016 Marketweight KBC 14/03/2017 Marketweight BPCEGP 12/06/2017 No recommendation KBC 22/02/2017 Restricted BPCEGP 03/02/2017 Coverage in transition LEGGR 27/07/2017 Overweight BPCEGP 10/01/2017 Restricted MAPSM 06/06/2017 Coverage in transition CCAMA 03/02/2017 Coverage in transition MAPSM 07/04/2017 Restricted CNPFP 03/02/2017 Coverage in transition MAPSM 03/02/2017 Coverage in transition Overview of our ratings

You will find the history of rating regarding recommendation changes as well as an overview of the breakdown in absolute and relative terms of our investment ratings on our website www.disclaimer.unicreditmib.eu/credit-research-rd/Recommendations_CR_e.pdf.

Note on the evaluation basis for interest-bearing securities:

Recommendations relative to an index: For high grade names the recommendations are relative to the "iBoxx EUR Benchmark" index family, for sub investment grade names the recommendations are relative to the "iBoxx EUR High Yield" index family.

Marketweight (MW): We recommend having the same portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is equal to the total return of the index.

Overweight (OW) : We recommend having a higher portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is greater than the total return of the index.

Underweight (UW): We recommend having a lower portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is less than the total return of the index.

Outright recommendations:

Hold (H): We recommend holding the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is equal to the yield.

Buy (B): We recommend buying the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is greater than the yield.

Sell (S): We recommend selling the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is less than the yield.

We employ three further categorizations for interest-bearing securities in our coverage:

Restricted (R): A recommendation and/or financial forecast is not disclosed owing to compliance or other regulatory considerations such as a blackout period or a conflict of interest.

Coverage in transition (T): Due to changes in the research team, the disclosure of a recommendation and/or financial information are temporarily suspended. The interest-bearing security remains in the research universe and disclosures of relevant information will be resumed in due course.

Not rated (NR): Suspension of coverage.

Trading recommendations for fixed-interest securities mostly focus on the credit spread (yield difference between the fixed-interest security and the relevant government bond or swap rate) and on the rating views and methodologies of recognized agencies (S&P, Moody’s, Fitch). Depending on the type of investor, investment ratings may refer to a short period or to a 6 to 9-month horizon. Please note that the provision of securities services may be subject to restrictions in certain jurisdictions. You are required to acquaint yourself with local laws and restrictions on the usage and the availability of any services described herein. The information is not intended for distribution to or use by any person or entity in any jurisdiction where such distribution would be contrary to the applicable law or provisions.

If not otherwise stated daily price data refers to pre-day closing levels and iBoxx bond index characteristics refer to the previous month-end index characteristics.

Coverage Policy A list of the companies covered by UniCredit Bank is available upon request.

Frequency of reports and updates It is intended that each of these companies be covered at least once a year, in the event of key operations and/or changes in the recommendation.

SIGNIFICANT FINANCIAL INTEREST UniCredit Bank AG and/or other related legal persons with them regularly trade shares of the analyzed company. UniCredit Bank AG and/or other related legal persons may hold significant open derivative positions on the stocks of the company which are not delta-neutral.

UniCredit Bank AG and/or other related legal persons have a significant financial interest relating to the analyzed company or may have such at any future point of time. Due to the fact that UniCredit Bank AG and/or any related legal person are entitled, subject to applicable law, to perform such actions at any future point in time which may lead to the existence of a significant financial interest, it should be assumed for the purposes of this information that UniCredit Bank AG and/or any related legal person will in fact perform such actions which may lead to the existence of a significant financial interest relating to the analyzed company.

Analyses may refer to one or several companies and to the securities issued by them. In some cases, the analyzed companies have actively supplied information for this analysis.

INVESTMENT SERVICES The analyzed company and UniCredit Bank AG and/or any related legal person concluded an agreement on the provision of investment services in the previous 12 months, in return for which the Bank and/or such related legal person received a consideration or promise of consideration or intends to do so. Due to the fact that UniCredit Bank AG and/or any related legal person are entitled to conclude, subject to applicable law, an agreement on the provision of investment services with the analyzed company at any future point in time and may receive a consideration or promise of consideration, it should be assumed for the purposes of this information that UniCredit Bank AG and/or any related legal person will in fact conclude such agreements and will in fact receive such consideration or promise of consideration.

ANALYST DECLARATION The author’s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly.

ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST To prevent or remedy conflicts of interest, UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Milan Branch, UniCredit Bank Austria AG, UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, ZAO UniCredit Bank Russia, UniCredit Bank Czech Republic and Slovakia Slovakia Branch, UniCredit Bank Romania, UniCredit Bank AG New York Branch have established the organizational arrangements required from a legal and supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers (collectively referred to as “Chinese Walls”) designed to restrict the flow of information between one area/department of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Milan Branch, UniCredit Bank Austria AG, UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, ZAO UniCredit Bank Russia, UniCredit Bank Czech Republic and Slovakia Slovakia Branch, UniCredit Bank Romania, UniCredit Bank AG New York Branch, and another. In particular, Investment Banking units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by physical and non-physical boundaries from Markets Units, as well as the research department. In the case of equities execution by UniCredit Bank AG Milan Branch, other than as a matter of client facilitation or delta hedging of OTC and listed derivative positions, there is no proprietary trading. Disclosure of publicly available conflicts of interest and other material interests is made in the research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporate finance activities, or other activities other than the sale of securities to clients.

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ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED

You will find a list of further additional required disclosures under the laws and regulations of the jurisdictions indicated on our website www.cib-unicredit.com/research-disclaimer.

Notice to Austrian investors: This analysis is only for distribution to professional clients (Professionelle Kunden) as defined in article 58 of the Securities Supervision Act.

Notice to investors in Bosnia and Herzegovina: This report is intended only for clients of UniCredit in Bosnia and Herzegovina who are institutional investors (Institucionalni investitori) in accordance with Article 2 of the Law on Securities Market of the Federation of Bosnia and Herzegovina and Article 2 of the Law on Securities Markets of the Republic of Srpska, respectively, and may not be used by or distributed to any other person. This document does not constitute or form part of any offer for sale or subscription for or solicitation of any offer to buy or subscribe for any securities and neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.

Notice to Brazilian investors: The individual analyst(s) responsible for issuing this report represent(s) that: (a) the recommendations herein reflect exclusively the personal views of the analysts and have been prepared in an independent manner, including in relation to UniCredit Group; and (b) except for the potential conflicts of interest listed under the heading “Potential Conflicts of Interest” above, the analysts are not in a position that may impact on the impartiality of this report or that may constitute a conflict of interest, including but not limited to the following: (i) the analysts do not have a relationship of any nature with any person who works for any of the companies that are the object of this report; (ii) the analysts and their respective spouses or partners do not hold, either directly or indirectly, on their behalf or for the account of third parties, securities issued by any of the companies that are the object of this report; (iii) the analysts and their respective spouses or partners are not involved, directly or indirectly, in the acquisition, sale and/or trading in the market of the securities issued by any of the companies that are the object of this report; (iv) the analysts and their respective spouses or partners do not have any financial interest in the companies that are the object of this report; and (v) the compensation of the analysts is not, directly or indirectly, affected by UniCredit’s revenues arising out of its businesses and financial transactions. UniCredit represents that: except for the potential conflicts of interest listed under the heading “Potential Conflicts of Interest” above, UniCredit, its controlled companies, controlling companies or companies under common control (the “UniCredit Group”) are not in a condition that may impact on the impartiality of this report or that may constitute a conflict of interest, including but not limited to the following: (i) the UniCredit Group does not hold material equity interests in the companies that are the object of this report; (ii) the companies that are the object of this report do not hold material equity interests in the UniCredit Group; (iii) the UniCredit Group does not have material financial or commercial interests in the companies or the securities that are the object of this report; (iv) the UniCredit Group is not involved in the acquisition, sale and/or trading of the securities that are the object of this report; and (v) the UniCredit Group does not receive compensation for services rendered to the companies that are the object of this report or to any related parties of such companies.

Notice to Canadian investors: This communication has been prepared by UniCredit Bank AG, which does not have a registered business presence in Canada. This communication is a general discussion of the merits and risks of a security or securities only, and is not in any way meant to be tailored to the needs and circumstances of any recipient. The contents of this communication are for information purposes only, therefore should not be construed as advice and do not constitute an offer to sell, nor a solicitation to buy any securities.

Notice to Cyprus investors: This document is directed only at clients of UniCredit Bank who are persons falling within the Second Appendix (Section 2, Professional Clients) of the law for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and other Related Matters, Law 144(I)/2007 and persons to whom it may otherwise lawfully be communicated who possess the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that they incur (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on by persons who are not relevant persons or relevant persons who have requested to be treated as retail clients. Any investment or investment activity to which this communication related is available only to relevant persons and will be engaged in only with relevant persons. This document does not constitute an offer or solicitation to any person to whom it is unlawful to make such an offer or solicitation.

Notice to Hong Kong investors: This report is for distribution only to “professional investors” within the meaning of Schedule 1 to the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) and any rules made thereunder, and may not be reproduced, or used by or further distributed to any other person, in whole or in part, for any purpose. This report does not constitute or form part of an offer or solicitation of any offer to buy or sell any securities, nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. By accepting this report, the recipient represents and warrants that it is entitled to receive such report in accordance with, and on the basis of, the restrictions set out in this “Disclaimer” section, and agrees to be bound by those restrictions.

Notice to investors in Ivory Coast: The information contained in the present report have been obtained by Unicredit Bank AG from sources believed to be reliable, however, no express or implied representation or warranty is made by Unicredit Bank AG or any other person as to the completeness or accuracy of such information. All opinions and estimates contained in the present report constitute a judgement of Unicredit Bank AG as of the date of the present report and are subject to change without notice. They are provided in good faith but without assuming legal responsibility. This report is not an offer to sell or solicitation of an offer to buy or invest in securities. Past performance is not an indicator of future performance and future returns cannot be guaranteed, and there is a risk of loss of the initial capital invested. No matter contained in this document may be reproduced or copied by any means without the prior consent of Unicredit Bank AG.

Notice to New Zealand investors: This report is intended for distribution only to persons who are “wholesale clients” within the meaning of the Financial Advisers Act 2008 (“FAA”) and by receiving this report you represent and agree that (i) you are a “wholesale client” under the FAA (ii) you will not distribute this report to any other person, including (in particular) any person who is not a “wholesale client” under the FAA. This report does not constitute or form part of, in relation to any of the securities or products covered by this report, either (i) an offer of securities for subscription or sale under the Securities Act 1978 or (ii) an offer of financial products for issue or sale under the Financial Markets Conduct Act 2013.

Notice to Omani investors: This communication has been prepared by UniCredit Bank AG. UniCredit Bank AG does not have a registered business presence in Oman and does not undertake banking business or provide financial services in Oman and no advice in relation to, or subscription for, any securities, products or financial services may or will be consummated within Oman. The contents of this communication are for the information purposes of sophisticated clients, who are aware of the risks associated with investments in foreign securities and neither constitutes an offer of securities in Oman as contemplated by the Commercial Companies Law of Oman (Royal Decree 4/74) or the Capital Market Law of Oman (Royal Decree 80/98), nor does it constitute an offer to sell, or the solicitation of any offer to buy non-Omani securities in Oman as contemplated by Article 139 of the Executive Regulations to the Capital Market Law (issued vide CMA Decision 1/2009). This communication has not been approved by and UniCredit Bank AG is not regulated by either the Central Bank of Oman or Oman’s Capital Market Authority.

Notice to Pakistani investors: Investment information, comments and recommendations stated herein are not within the scope of investment advisory activities as defined in sub-section I, Section 2 of the Securities and Exchange Ordinance, 1969 of Pakistan. Investment advisory services are provided in accordance with a contract of engagement on investment advisory services concluded with brokerage houses, portfolio management companies, non-deposit banks and the clients. The distribution of this report is intended only for informational purposes for the use of professional investors and the information and opinions contained herein, or any part of it shall not form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.

Notice to Polish Investors: This document is intended solely for professional clients as defined in Art. 3.39b of the Trading in Financial Instruments Act of 29 July 2005 (as amended). The publisher and distributor of the document certifies that it has acted with due care and diligence in preparing it, however, assumes no liability for its completeness and accuracy. This document is not an advertisement. It should not be used in substitution for the exercise of independent judgment.

Notice to Serbian investors: This analysis is only for distribution to professional clients (profesionalni klijenti) as defined in article 172 of the Law on Capital Markets.

Notice to UK investors: This communication is directed only at clients of UniCredit Bank who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the United Kingdom Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.

CR e 17/5




UniCredit Research* Credit Research

Erik F. Nielsen Group Chief Economist Global Head of CIB Research +44 207 826-1765 [email protected]

Dr. Ingo Heimig Head of Research Operations & Regulatory Control +49 89 378-13952 [email protected]

Head of Credit Research

Dr. Sven Kreitmair, CFA Head of Credit Research +49 89 378-13246 [email protected]

Financials Credit Research

Franz Rudolf, CEFA Head Covered Bonds +49 89 378-12449 [email protected]

Valentina Stadler Deputy Head Sub-Sovereigns & Agencies +49 89 378-16296 [email protected]

Dr. Tilo Höpker Banks +49 89 378-12960 [email protected]

Natalie Tehrani Monfared Regulatory & Accounting Service +49 89 378-12242 [email protected]

Dr. Michael Teig Banks +49 89 378-12429 [email protected]

Robert Vielhaber Sub-Sovereigns & Agencies, Green Bonds +49 89 378-12004 [email protected]

Corporate Credit Research

Dr. Sven Kreitmair, CFA Co-Head Automotive & Mobility +49 89 378-13246 [email protected]

Stephan Haber, CFA Co-Head Telecoms, Technology +49 89 378-15192 [email protected]

Jana Arndt, CFA Industrials, Real Estate +49 89 378-13211 [email protected]

Christian Aust, CFA Industrials +49 89 378-12806 [email protected]

Mehmet Dere Oil & Gas, EEMEA Energy, Consumer +49 89 378-11294 [email protected]

Michael Gerstner Utilities, Hybrids +49 89 378-15449 [email protected]

Jonathan Schroer, CFA Media/Cable, Logistics, Business Services +49 89 378-13212 [email protected]

Dr. Silke Stegemann, CEFA Health Care & Pharma, Food & Beverage, Personal & Household Goods +49 89 378-18202 [email protected]

UniCredit Research, Corporate & Investment Banking, UniCredit Bank AG, Arabellastrasse 12, D-81925 Munich, [email protected] Bloomberg: UCCR, Internet: www.research.unicredit.eu CR 17/3

*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank, Munich or Frankfurt), UniCredit Bank AG London Branch (UniCredit Bank, London), UniCredit Bank AG Milan Branch (UniCredit Bank, Milan), UniCredit Bank New York (UniCredit Bank, New York), UniCredit Bank Austria AG (Bank Austria), UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, ZAO UniCredit Bank Russia (UniCredit Russia), UniCredit Bank Romania.

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