JPMorgan has topped our poll for the Most Impressive Bank for SSAs for the past five years, a result due on one side to continued investment in the business over a number of years and on the other to the advantage of keeping together what has been one of the most stable coverage teams in the business.
The stability provides many benefits, says Ioannis Rallis, head of sovereigns, supranationals and agencies DCM at JPMorgan. “First, it has allowed us to create and foster a certain culture and way of doing things and second, we are viewed as a reliable team by our clients, and they really appreciate that they have had the same coverage person for 15-plus years and not constant rotations.
“The SSA business is important for the JPMorgan rates franchise, and the stability and success of the group means we get engagement, attention or support when we need it from sales, trading or anywhere else in the bank.”
The coronavirus pandemic meant that there was really just one big story in the SSA sector this year: the huge volume of additional borrowing that sovereigns would need to do in order to finance the spending crucial to helping citizens and companies through the crisis. There weren’t just more syndicated deals, there were many more in unprecedented size.
Two days in April set the tone — and proved that markets would fund the necessary borrowing from sovereigns across Europe. First, Italy raised €16bn in a dual tranche transaction that smashed all records with an order book of €110bn, then Spain raised €15bn a day later with an order book of €96bn.
JPMorgan worked on both these deals, as well as almost all of the other big sovereign offers at the time, including trades from Austria (€7bn), Portugal (€5bn) and Ireland (€6bn).
“Given our investment and commitment to primary dealerships over the last five years we’ve earned ourselves a position with DMOs where we became the go-to bank, the bank of choice for the larger transactions, especially in the most difficult times this year,” says Rallis.
That investment in primary dealerships is not something that every bank has made. Back in 2015, JPMorgan faced the same problem as many across the Street in that primary dealerships were becoming an expensive and unremunerative business. Some decided it didn’t make sense for them and exited their dealerships.
“We took a different approach,” says Rallis. “We said it’s such a big business, so costly and so important for the market that we should rethink it and do it properly. We started to invest, to co‑ordinate better, to improve on the metrics that are important in each market and over the years ensure we get to at least a top five position with all the sovereigns, if not a top three position.
“Only then did we find that the whole business makes sense.”
Environmental, social and governance (ESG) factors have over the last year become an ever more important part of the SSA market, and in particular is becoming better established in the sovereign sector with several notable green debuts in 2020 — not least the entry of Germany with its innovative twin bond structure in August. Rallis points to the advantage of being able to draw on the expertise of Marilyn Ceci, head of ESG at JPMorgan and one of the co-authors of the Green Bond Principles.
“Green was a trend we identified early and we’ve been lucky to have Marilyn as thought leader inside the bank,” he says.
JPMorgan has worked on many of the debut sovereign green deals including those for Belgium, Ireland, Poland and the German deal.
“ESG is a huge trend in the industry and SSAs have been at the forefront of developing and growing this market,” he notes. “It is important to be a leading bank in the field and to be a leading partner for issuers.”
It positions JPMorgan well for the coming wave of ESG bonds that is expected from the European Union’s €100bn Support to mitigate Unemployment Risks in an Emergency (SURE) programme and its €750bn recovery fund.
“The ESG market is going to see another huge revolution in terms of volume and you need to have the investor access to help issuers distribute those bonds and make it happen,” says Rallis.
