Following the rating action on the Irish sovereign last week, Moody’s has now upgraded the government-guaranteed debt of the Irish banks (AIB, BoI, ptsb, EBS) to Baa3 (from Ba1), with the outlook moving to positive. Moody’s has left all the other bank ratings unchanged. <p>

This latest upgrade by Moody’s was not a surprise following its recent action on the Irish sovereign last Friday (17 January). Since then we have seen pricing improve across the banks’ capital structures and funding lines, which is encouraging for new issuance. We estimate that the PCAR banks have c. €16bn of scheduled term funding redemptions over 2014 and 2015, with government-guaranteed senior debt comprising c. €7bn of this total (AIB – €3bn, BoI – €2bn, ptsb – €2bn). In addition the banks have €6.3bn and €1.7bn of covered bond and senior unsecured unguaranteed maturities over the next twenty four months. <p>

While the pillar banks have raised €1.25bn of senior unsecured term funding since November in two separate transactions, we would expect further unsecured issuance in 2014 as the banks move to pre-fund redemptions and to capitalise on the re-rating of Irish debt in the current environment. Access to new unsecured debt will be particularly important to the Irish banks as they seek to improve Net Stable Funding Ratios and to replace the €7bn government-guaranteed redemptions in 2015. Margins should also benefit as the banks roll-over these bonds at lower funding rates (and without the requirement to pay guarantee fees to the State).
<p><h5>Ciaran Callaghan</h5>


Merrion Stockbrokers Limited (registration no. 307878)
is a limited liability company whose registered office is at
Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.