EM CEEMEA CREDIT: Arab National Bank: FV for $ PNC5.5 AT1 Sust. Sukuk
Sep-02 07:54
(ARNBAB; A1/A-/A-)
IPT @ 6.875% area FV @ 6.30%
- We see FV at z+290bp or 6.30% yield area. For comparables, there is a wealth of recent $ AT1 deals, all ’25 vintages. Therefore, we look at similar structures for recently issued Sukuk format Alinma Bank (ALINMA; A2/A-/A-) charting @ z+280bp or 6.20% area (priced end-Aug at 6.25% yield), Sukuk format Bank Albilad (ALBIAB; A2/NR/A-) charting at z+288bp or 6.26% area (priced mid-May at 6.50%), Sukuk format Saudi Awwal Bank (SABBAB; A1/NR/A-) charting at z+262bp or 6.00% area (priced mid-May @ 6.50%) and Banque Saudi Fransi (BSFR; A1/A-/A-) charting at z+278bp or 6.18% area (priced end-Apr @ 6.375%).
- In addition, higher rated Al Rajhi Bank (RJHIAB; Aa3/A/A-) charts at z+250bp or 5.90% (priced mid-Jan at 6.25%), whilst ’24 vintage, Sukuk format Saudi Investment Bank (SIBCAB; A2/BBB+/A-) charts at z+262bp or 6.00% area (priced end-Nov at 6.375%).
- For context, Arab National Bank released its latest earnings on July 22, a solid read. Profitability has been on the rise with Total op Inc +11.1% y/y at almost SAR 2.6bn, mainly a reflection of Net SC Inc +11.9% y/y at SAR2.17bn (Net F&C +15.6% y/y). PBT +8.1% y/y in excess of SAR1.5bn. NIM evolution at 3.67% looks sequentially stable despite rates cycle headwinds. NIM guidance for ’25 is revised to 3.5%-3.6% (above industry average reported at 3.09%). Efficiency remains adequate with C/I ratio in line with guidance below 32%.
- During Q2, the Bank has seen continuation of B/S expansion, with total assets approaching SAR269bn, +1.6% q/q. That is consistent with upward trajectory showing +8.3% YtD. Corporate lending remains in focus (+16.4% y/y, SAR186.5bn) and accounts for 75% of total, we note some concentration across key industries (Transportation & storage 39%, Real Estate 19%, Services 19%). The retail segment (+12.6% y/y) offers a balanced mix of secured (home loans 54% and auto loans 3%) and unsecured (personal loans 40% and credit cards 3%) exposure. Lending growth remains well supported by deposits (+14.9% y/y, SAR201.7bn), with CASA +18.6% y/y at SAR110.1bn vs time deposits +10.8% y/y at SAR91.6bn.
- Asset quality remained best in class, with NPL ratio on a downward trajectory at 1.18%, sequentially lower vs 1.34% in Q1, coupled with a strong coverage ratio at 141%. CoR remains moderate at 42bp sitting at the low end of the 40-50bp FY guidance range.
- Liquidity benefits from strong deposit base, with L/D ratio at 82%, well below the regulatory cap of 90%. LCR is sequentially stable at a conservative 133%. Capital remains adequate with CET1 at 16.5%, and CAR at 19.6%. RWA show +13.8% y/y.
- For reference, Arab National Bank was founded in 1979. It boasts a strong focus on the Kingdom of Saudi Arabia with international presence in London. With over 2mn customers and 122 branches, the Bank provides services and contributes to national growth across diversified economic sectors.
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JGB TECHS: (U5) NFP Tips Prices Sharply Higher
Aug-01 22:45
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 138.63 @ 17:23 GMT Aug 1
- SUP 1: 137.32 - Low Jul 25
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs rallied sharply alongside global bond markets Friday, piercing mid-week resistance in the process. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal. A return lower would signal scope for an extension towards 136.57, a Fibonacci projection.
USDCAD TECHS: Slips Sharply on USD Downdraft
Aug-01 20:00
- RES 4: 1.4111 Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3920 High May 21
- RES 1: 1.3879 High Aug 1
- PRICE: 1.3794 @ 17:42 BST Aug 1
- SUP 1: 1.3716/3557 20-day EMA / Low Jul 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
A short-term bullish corrective phase in USDCAD remains in play despite sharp weakness Friday. On the recent run higher, price traded through the 50-day EMA at 1.3739 and this has been followed by a break of resistance at 1.3798, the Jun 23 high. Clearance of 1.3798 represents an important short-term bullish development, signalling scope for a stronger recovery. Sights are on 1.3920 next, the May 21 high. On the downside, initial firm support to watch lies at 1.3716, the 20-day EMA.
MACRO ANALYSIS: MNI US Macro Weekly: Poor Payrolls Trumps Patient Powell
Aug-01 19:36
- We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week.
- Please find the full report here.
Executive Summary
- The second half of the week has seen some significant moves in markets from first a patient Fed Chair Powell not giving a nod to a September rate cut before a weak payrolls report with huge downward revisions materially altered recent trends.
- Nonfarm payrolls growth underwhelmed at 73k in July but the major headline was the -258k two-month downward revision, of which -139k came from the private sector and -119k from the public sector. Outside of April 2020, that’s the largest two-month downward revision in at least forty-five years.
- We caution though that whilst jobs growth has soured sharply, it’s doing so along with a significant slowing in labor supply under immigration curbs.
- As such, the unemployment rate may have technically ticked up to a new cycle high of 4.248% (above 4.244% in May) but it continues to roughly plateau in the 4.0-4.25% range seen since last July. The median FOMC forecast from the June SEP had the unemployment rate increasing to an average 4.5% in 4Q25 as part of forecast with two rate cuts in 2025 so further deterioration would be expected.
- A note on the latest initial jobless claims data, which are back at 2019 averages, a period when the unemployment rate averaged 3.7%.
- The weak report prompted an extraordinary response from President Trump, directing his team to fire BLS Commissioner Erika McEntarfer. It’s a broadening out of criticism beyond the Fed’s Powell and its Board.
- Speaking after payrolls, Atlanta Fed’s Bostic (in a non-voting role this year) said he hasn’t changed his view that there should be just one rate cut this year.
- Elsewhere in a major week for data, core PCE inflation exceeded latest Fed tracking in June at 2.8% Y/Y, whilst away from any tariff impact, market-based services inflation printed 3.3% Y/Y. Various inflation metrics showed a continued stabilization at above 2% target rates.
- The Q2 GDP advance release meanwhile beat analyst expectations with 3.0% annualized although it was close to Atlanta Fed GDPNow expectations. PDFP moderated further to 1.2% annualized for its weakest since 4Q22 although could have been worse.
- As a precursor to next week’s ISM Services report, the Manufacturing counterpart was weak across the board in July. Prices paid pulled back from recent highs, new orders chalked up a sixth consecutive month firmly in contraction territory and the employment index fell to its lowest since mid-2020.
- Yields have tumbled after the weak payrolls report. A September cut is mostly priced now vs 50/50 before the release, with a cumulative 59bp by year-end and five cuts in total from current levels.
