Credit Market Pulse
∫ Europe
Improving Credit Trends
∫ Spotlight: EU Quantitative Easing…
Is It Working?
APRIL 2015
Issue 8
To subscribe to this bi-monthly report, visit:
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Credit Market Pulse
W
elcome to the eighth issue of Credit Market Pulse. S&P Capital IQ’s bi-monthly snapshot of corporate credit risk conditions around the world
based on median corporate probability of default (PD) values for entities covered by our PD Market Signals Model(1).
In addition to the global credit coverage that this publication consistently provides, we have added several features to this issue, including insights
into the initial impact of the european quantitative easing (Qe), and an updated Heatmap of european credit risk, previously seen in Credit Market
Pulse: September 2014.
2015 credit quality improvements decelerating over the first 4-weeks since european Qe implementation
According to S&P Capital IQ data, the preliminary results from the first 4-weeks following the introduction of the EU quantitative easing program showed
the lowest impact on overall credit quality improvement when looking at it through the major relevant indexes across the EU, USA and UK(2). Measuring the
impact across all S&P Europe BMI® constituents, average short-term credit quality improved by a negligible 0.04 percentage-points to the 0.08% PD level
(implying a less than a notch improvement in score (3)). This compares poorly with the 1.87 percentage-points improvement that followed the first US QE
round, or the 0.2 percentage-points recorded after the first 4-weeks of the first UK QE round. Since this daily PD metrics reflect market estimations, it
would appear that credit quality was more directly impacted by the announcement of the QE rather than the implementation of the program(4).
Another interesting outcome is the uneven performance seen across the financials and non-financials sectors. At the S&P Europe BMI level, both seem to
have fared similarly with a one notch improvement, however the picture changes across some of the larger geographies. Financials showed better credit
quality gains in France and Germany whilst at the same time, non-financials moved in the opposite direction. Whilst still early days, these trends seem to
validate the expectations behind the positive effect of the repurchasing program in bank liquidity, but this has yet to translate into additional liquidity in
the form of lending to the non-financial corporate sector and subsequent impact on economic activity—key drivers behind European QE.
We found in the 4-weeks ending April 3rd 2015:
z
z
z
An minor impact on credit quality across Europe, pointing to the financial sector in France as the front-runner and the non-financial sector in Germany
as underdog
That the median PD for French financials stands out, with an improvement of 2 notches since the introduction of QE program (to a 0.01% PD or ‘aa’ score)
That of the larger EU economies, Germany is the one country that has garnered no early credit quality benefits
First 4-Weeks of the Quantitative Easing Performance
Region
A
B
PD & Score at last day of 4th week of QE*
PD change over first 4 weeks of QE
(changes in % points and notches)
USA-QE 1
(Nov 2008)
UK-QE 1
(Mar 2009)
EU-QE 1
(Mar 2015)
5.70%
13.29%
(b)
C
D
4 Weeks Index Performance
from start of QE**
Stylized Credit Risk
Adjusted Return***
-0.4 x
-1.87
+1 notch
-2.4%
Reference index
S&P 500 (full index)
(ccc+)
-4.99
+1 notch
-0.3%
0.0 x
4.04%
(b)
-1.32
—
-2.1%
-0.5 x
S&P 500—financials only
1.46%
(bb-)
-0.2
—
-13.2%
-9.0 x
0.58%
(bb+)
-0.13
—
-6.4%
-11.0 x
1.68%
(bb-)
-3E-01
—
-6.7%
-4.0 x
0.08%
(a-)
-0.04
—
-0.9%
-11.3 x
0.07%
(a)
-0.01
+1 notch
-0.4%
-5.7 x
S&P Europe BMI—financials only
0.08%
(a-)
-0.05
+1 notch
-0.4%
-5.0 x
S&P Europe BMI—excluding -financials
0.05%
(a)
—
—
-4.3%
-86.0 x
S&P Germany BMI (full index)
0.06%
(a)
—
—
-1.5%
-25.0 x
S&P Germany BMI—financials only
0.05%
(a)
0.01
-1 notch
-2.7%
-54.0 x
S&P Germany BMI—excluding -financials
0.07%
(a)
-0.04
+1 notch
-3.7%
-52.9 x
S&P France BMI (full index)
0.01%
(aa)
-0.02
+2 notches
-1.4%
-140.0 x
0.08%
(a-)
-0.04
—
-2.4%
-30.0 x
S&P France BMI—excluding -financials
0.17%
(bbb+)
-0.08
+1 notch
-4.0%
-23.5 x
S&P Italy BMI (full index)
0.18%
(bbb+)
-0.01
—
-2.3%
-12.8 x
S&P Italy BMI—financials only
0.16%
(bbb+)
-0.14
+1 notch
-1.7%
-10.6 x
S&P Italy BMI—excluding -financials
0.13%
(bbb+)
-0.04
—
-6.3%
-48.5 x
S&P Spain BMI (full index)
0.15%
(bbb+)
-0.02
—
-3.7%
-24.7 x
S&P Spain BMI—financials only
0.11%
(a-)
-0.06
+1 notch
-2.6%
-23.6 x
S&P Spain BMI—excluding -financials
S&P 500—excluding -financials
FTSE 100 (full index)
FTSE 100—financials only
FTSE 100—excluding -financials
S&P Europe BMI (full index)
S&P France BMI—financials only
Source: S&P Capital IQ. Data as of April 3, 2015
*
PD last day of 4th week—The average PD for each instance was calculated as the average of the individual constituents of the relevant index on last day of 4th week period since the begining of the quantitative easing
for each market; taking as weighting component the actual weight of the constituent in the referred index. A decline in PD a positive attribute as it represents a lower credit risk.. The lower case letter grade is a score
representation of the actual PDs.
**
4 Weeks Index Performance from start of QE—The 4 Weeks Index Performance for each instance was calculated as the average return of the individual constituents of the relevant index from first day of the quantitative
easing to the last day of the 4th week for each market; taking as weighting component the actual weight of the constituent in the referred index.
***
Stylized Credit Risk Adjusted Return—Simple division of 4-Weeks Index performance in (**), by PD last day of the 4th week (*)
2 | APRIL 2015 | Issue 8
www.spcapitaliq.com
S&P CAPITAL IQ Credit Market Pulse
QE on the horizon? Do not expect a short-term positive impact on overall returns…
The performance for some of the most representative indexes of the geographies that actively pursued QE (5), shows that during the first 4-weeks of the
programs implementation, returns are at best a ‘market correction’. As displayed in table 1, this is consistent across financials and non-financials.
In terms of relative returns, Europe takes the lead, with the lowest loss at 0.9% versus 13.2% in the same first 4-weeks period of UK QE. Within the Eurozone
though, the gap of performance between the S&P Europe BMI and the German, French, Spanish and Italian sub-indexes, would imply that the impact on key
economies has been a lot harsher. This study uses as the starting point the date of the beginning of the implementation of each QE program and hence may
not capture any positive impact that could have already been in play from the time of the announcement of these measures.
The jury is out: following the first 4-weeks the US QE program revealed the lowest credit risk adjusted losses
The combination of credit risk measured on the last day of the study period and the returns over the first 4-weeks since the introduction of the QE helps to
complete the picture. Based on our simplified calculation of credit risk adjusted return (CRAR), the losses across all indexes determine a negative performance
throughout. Given this, the level of PD of each country plays a strong role in displaying the final results, hence shining a more positive light on the US and
UK that undertook their QEs where levels of short-term credit risks where at the highest. With Europe undertaking this initiative at a time of relative credit
bonanza the equation amplifies the total impact of the market decline, as it proves that the relative loss (rather than return) per unit of credit risk was
actually higher.
Key highlights as of April 3, 2015:
zz
Heatmap spotlights risks in Europe(7)
The values displayed in the heatmap are based on median
corporate daily PD values as of March 31st, 2015 and changes
relative to January 31, 2015. The pictured has changed since
the first time we reported on this in our September issue(8).
Generally, Northern and Western Europe show the most
favorable credit conditions and most nations within have
improved in credit quality.
zz
Highest Risk
Austria
Belgium
Bulgaria
Croatia
Cyprus
Czech Rep.
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Isle of Man
Italy
Luxembourg
Malta
Netherlands
Norway
Poland
Portugal
Romania
Serbia
Slovakia
Slovenia
Spain
Sweden
Switzerland
Turkey
Ukraine
U.K.
Percent change in Country Median PD
since 6/15/2013
Strong Increase (>20%)
Moderate Increase (10% to 20%)
Stable (-10 to 10%)
Moderate Decrease (-20% to -10%)
Strong Decrease (<-20%)
Poland
Romania
Czech Republic
Estonia
All but four countries (Czech Republic, Isle of Man,
Slovakia and Turkey) have remained at the same level of
creditworthiness or improved in credit quality
Ukraine continues to have the highest median credit
risk in Europe at 28.33%, up slightly from 27.44%
seen over the past two months
Portugal, Spain and the Netherlands have all cut
their median credit risk by at least 50% since
January 31, 2015.
Slovenia
Slovakia
zz
Lowest Risk
Some highlighted findings as of April 3, 2015:
zz
Heatmap: European Credit Risk
zz
The QE programs within this study show consistent negative credit adjusted returns across geographies and sectors (6)
On a credit risk adjusted return basis Europe (-11.3x) so far rank behind those of the US (-0.4x) and UK (-9.0x)
Germany (-86x) and France (-53x) display weaker performance than Spain (-48.5x) and Italy (-23.5x)
zz
0.10%
0.26%
1.11%
1.00%
3.68%
0.25%
0.21%
0.09%
0.16%
0.21%
6.95%
0.71%
0.09%
1.50%
0.21%
0.49%
0.12%
0.11%
0.55%
1.34%
0.64%
2.49%
1.26%
0.09%
0.66%
0.24%
0.31%
0.10%
0.65%
28.33%
0.32%
Source: S&P Capital IQ. Data as of March 31, 2015.
[1] PDs are produced by S&P Capital IQ Probability of Default Market Signals model. PD Market signals is a quantitative equity-based model that is completely independent from Standard & Poor’s Rating Services. The
quantitative scores derived from this model are represented throughout the report in lower case letter grade to differentiate these from Standard & Poor’s Rating Services public ratings.
[2] Note that the credit analysis in section 1, expands the evaluation of this trend beyond major index constituents (Column E) into the broader publicly listed universe across the evaluated geographies. The most notable
difference is the performance of Germany that in this longer timeframe shows an improvement in credit quality at the beginning of 2015 that sustained itself through the end of March.
[3] As shown in column (B) of Table 1.
[4] Further reading recommended ‘Four reasons why QE won’t restore Eurozone growth’ by Standard & Poor’s Rating Services March 19, 2015.
[5] As shown in column (C) of Table 1.
[6] As shown in column (D) of Table 1.
[7] We have excluded countries with fewer than 15 covered companies. Also note that the first section of the report (p. 3) utilizes a threshold of $500M USD in revenues and $1B USD in total assets, but median PDs in this
heat-map include all entities covered. Finally note that we have assigned colors based on groupings of PDs mapped to credit scores such that ‘a’ are shown as dark green, all ‘bbb’s light green, all ‘bb’s yellow, all ‘b’s orange
and ccc (Ukraine only) as red.
[8] http://www.spcapitaliq-credit.com/credit-market-pulse-september-2014/
www.spcapitaliq.com
APRIL 2015 | Issue 8 | 3
S&P CAPITAL IQ Credit Market Pulse
Global Credit Risk Trends: Credit risk largely unaffected by either FX, Greece or global
geopolitical threats (ECB’S QE program helped a little)
North America
Western Europe
APAC Mature
France
Italy
Germany
BRIC
Spain
2014-2015 Monthly PD Changes
2012-2015 Monthly PD Changes
(%)
(%)
1.2
2.0
1.8
1.6
1.0
1.4
0.8
1.2
0.6
1.0
0.8
0.4
0.6
0.4
0.2
0.2
0
0.0
Mar June Sept Dec Mar June Sept Dec Mar June Sept Oct Nov Dec Jan Feb Mar
2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2015 2015 2015
Source: S&P Capital IQ. Data as of March 31, 2015
zz
Sept
2014
Oct
2014
Nov
2014
Dec
2014
Jan
2015
Feb
2015
Mar
2015
Global View—Median PD levels for corporations in the developed regions have never been closer since January 2011: 0.07% (‘a’) for North America, 0.08%
(‘a-‘) for Western Europe and 0.10% (‘a-‘) for Asia Mature. Overall, they have remained stable or have marginally improved over the last two months. The
median PD for BRIC countries has considerably improved from 0.97% to 0.67%, although this translates only into a one notch improvement from ‘bb’ to
‘bb+’ and keeps the median in the non-investment grade territory.
On one hand, this market view of stable or even slightly improving short-term credit risk is remarkable under current market conditions of uncertainty of the
direction of the oil price, a sharp adjustment of the EUR/USD exchange rate, a seemingly never ending struggle of Greece with its creditors and geopolitical
risks around the globe. On the other hand, our data does not indicate a major improvement either, which would be a strong signal for the efficiency of
ECB’s recently launched QE program. One may argue that the current market view of stable credit risk at relatively low levels under otherwise adverse
circumstances from many directions is already a first sign of success for the QE program.
zz
European View—Focusing on the four largest continental economies Germany, France, Italy and Spain; marginal improvements in credit risk for all
countries can be observed over the last two months. However, compared to six months ago, Germany and France have improved in tandem from the ‘bbb’
to the ‘a+’ level, which is two notches better than the average of all Western European countries. Italy and Spain have also improved by two and one notch,
respectively, to the ‘bbb+’ level, which is even above the sovereign rating for these two countries, but—unsurprisingly—one notch lower than the European
average. Based on this data, it could be inferred that Draghi’s announcement for ECB’s QE in late 2014 was the main stimulus of an improvement in the
market view of credit risk, while its actual implementation four weeks ago has had little impact so far.
2014 Monthly PD Changes (%)
PD
SepT 30,
2014
OCT 31,
2014
2014 Monthly Credit Scores
NOV 30,
2014
DEC 31,
2014
JAN 31,
2015
FEB 28,
2015
MAR 31,
2015
Mapped Score
SepT 30,
2014
OCT 31,
2014
NOV 30,
2014
DEC 31,
2014
JAN 31,
2015
FEB 28,
2015
MAR 31,
2015
North America (2,507*)
0.05%
0.07%
0.06%
0.07%
0.08%
0.08%
0.07%
North America (2,507*)
a
a
a
a
a
a-
a
Western Europe (1,583*)
0.15%
0.20%
0.12%
0.16%
0.08%
0.07%
0.08%
Western Europe (1,583*)
bbb+
bbb+
a-
bbb+
a-
a
a-
APAC Mature (2,482*)
0.07%
0.18%
0.16%
0.20%
0.12%
0.09%
0.10%
APAC Mature (2,482*)
a
bbb+
bbb+
bbb+
a-
a-
a-
BRIC (1,710*)
0.57%
0.61%
0.67%
0.99%
0.97%
0.84%
0.67%
BRIC (1,710*)
bb+
bb+
bb+
bb
bb
bb+
bb+
France (214*)
0.14%
0.31%
0.09%
0.18%
0.05%
0.04%
0.04%
France (214*)
bbb+
bbb
a-
bbb+
a
a+
a+
Germany (187*)
0.20%
0.29%
0.11%
0.14%
0.04%
0.03%
0.04%
Germany (187*)
bbb+
bbb
a-
bbb+
a+
a+
a+
Italy (115*)
0.56%
0.44%
0.29%
0.44%
0.19%
0.18%
0.18%
Italy (115*)
bb+
bbb-
bbb
bbb-
bbb+
bbb+
bbb+
Spain (73*)
0.21%
0.32%
0.21%
0.31%
0.17%
0.18%
0.14%
Spain (73*)
bbb
bbb
bbb
bbb
bbb+
bbb+
bbb+
Source: S&P Capital IQ. Data as of March 31, 2015
www.spcapitaliq.com
Source: S&P Capital IQ. Data as of March 31, 2015
APRIL 2015 | Issue 8 | 4
S&P CAPITAL IQ Credit Market Pulse
Credit Trends Behind Major Market Indexes: Winds of Change Blowing in Favor of Europe
Consumer Discretionary
Information Technology
Energy
Consumer Staples
Telecom Services
Financials
Utilities
Materials
Healthcare
Industrials
S&P Global LargeMidCap
5-Week PD Changes
2014-2015 Monthly PD Changes
(Log scale)
(Log scale)
1.00
1.60
1.40
1.20
1.00
0.80
0.10
0.60
0.40
0.20
0.00
Mar
2014
Apr
2014
May
2014
June
2014
July
2014
Aug
2014
Sept
2014
Oct
2014
Nov
2014
Dec
2014
Jan
2015
Feb
2015
Mar
2015
0.01
Mar 5,
2015
Mar 10 ,
2015
Mar 15,
2015
Mar 20,
2015
Mar 31,
2015
Source: S&P Capital IQ. Data as of March 31, 2015
zz
S&P Europe 350® Index credit quality closed at its best of the last 12-months, thanks to the credit risk tempering on Energy constituents:
Reaching a short-term quantitative score of ‘a-’, the overall index displayed the lowest level of monthly average PD (0.08%). One of the key aiding factors
was the reduction in the overall credit risk level of its Energy sector constituents that played out over the last two weeks of March. The improvement in the
short-term credit quality of this sector resulted in a score of ‘bbb’ (0.29% PD) at the close of March; down from the highest level recorded in 2015 of 0.86%
PD (‘bb+’). Most notably, the formerly weakest Energy constituents SeaDrill Ltd [NYSE:SDRL] and Saipem SpA [BIT:SPM] achieved the greatest improvements.
These two companies saw their short-term credit quality improve to ‘b-‘, (6.18% PD); and ‘bb-‘,(1.5% PD) respectively from its lackluster earlier levels of ‘ccc’,
(19.35% PD) (SDRL) and ‘b-’ (8.22% PD) (SPM) as of March 17th, 2015. Both companies most recent earnings reports seemed to have appeased concerns
coming from: a dividend halt and subsequent lawsuits in SDRL; and the weaker December 2014 earning guidance by SPM .
zz
zz
IT and Consumer Discretionary sectors led the credit chart of the S&P Europe 350. At a full score category above the index itself, IT (‘aa’) and Consumer
discretionary (‘aa-’) constituents have been the consistent best performers of 2015 so far. Infineon Technologies [XTRA:IFX] and SAP [DB:SAP] were the
star performers, both recording a PD of 0.004% or ‘aaa’. The positive year-end results coupled with a recent effective fixed income issuance, seem to be
supporting both the good credit quality and positive broker consensus estimates on IFX. Similarly, SAP’s recent refinancing has resulted in the reaffirmation
by Standard & Poor’s of the company’s long-term ‘A’ credit rating for the new issues, and at the same time seems to have fostered an improvement in
short-term credit quality expectations to the ‘aaa’ level. On the consumer discretionary front, [OM:HM B], [LSE:NXT] and [SWX:UHR] displayed the best
short-term credit performances, all reaching the ‘aaa’, (0.004% PD level). Yet unlike IT, the consumer discretionary sector sub-set also hid a ‘bb-’ drag of
Ladbrokes PLC [LSE:LAD] that recently underwent a combination of executive changes and downsizing.
S&P 500®: stable at ‘a-’, but overshadowed by the S&P Europe 350 in 2015 because of Consumer Discretionary and Financial constituent burdens.
Over the last 12-months through March 2015, the S&P 500 reached an average PD of 0.07% which was almost half of the level presented by its European peer
index. Yet, this relative strength disappeared into the current parity at the 0.08% PD over the first quarter of 2015. Whilst constituents across the Telecom and
Utilities ranked safer than their European peers; Consumer Discretionary and Financials were the two sectors that presented the most meaningful credit quality
underperformance at the close of March. Mattel Inc [NASDAQ:MAT], Wynn Resorts Ltd [NASDAQ:WYNN] and Cablevision Systems Corp [NYSE:CVC] appear to be
experiencing the highest credit quality pressure within the Consumer Discretionary sector both at a ‘bb-’ score, whilst State Street Corp [NYSE:STT] and
American Express Co [NYSE:AXP] stood at ‘bb’ and ‘bb+’ respectively.
Weekly S&P Europe 350 PD Changes
Weekly S&P Europe 350 PD Credit Scores
PD
MAR 3,
2015
MAR 10,
2015
MAR 17,
2015
MAR 24,
2015
MAR 31,
2015
Mapped Score
MAR 3,
2015
MAR 10,
2015
MAR 17,
2015
MAR 24,
2015
MAR 31,
2015
Consumer Discretionary
0.02%
0.02%
0.02%
0.02%
Consumer Staples
0.03%
0.04%
0.04%
0.03%
0.02%
Consumer Discretionary
aa-
aa-
aa-
aa-
aa-
0.03%
Consumer Staples
a+
a+
a+
a+
a+
Energy
0.50%
0.74%
0.86%
Financials
0.08%
0.08%
0.08%
0.42%
0.29%
Energy
bbb-
bb+
bb+
bbb-
bbb
0.08%
0.07%
Financials
a-
a-
a-
a
Healthcare
0.26%
0.03%
a
0.02%
0.02%
0.02%
Healthcare
bbb
aa-
aa-
aa-
Industrials
0.09%
aa-
0.08%
0.08%
0.08%
0.06%
Industrials
a-
a-
a-
a
a
Information Technology
Materials
0.02%
0.01%
0.01%
0.01%
0.01%
Information Technology
aa-
aa
aa
aa
aa
0.11%
0.15%
0.17%
0.12%
0.12%
Materials
a-
bbb+
bbb+
a-
a-
Telecommunication Services
0.21%
0.41%
0.41%
0.28%
0.28%
Telecommunication Services
bbb
bbb-
bbb-
bbb
bbb
Utilities
0.16%
0.18%
0.17%
0.16%
0.15%
Utilities
bbb+
bbb+
bbb+
bbb+
bbb+
S&P Europe 350
0.14%
0.13%
0.14%
0.10%
0.08%
S&P Europe 350
bbb+
bbb+
bbb+
a-
a-
Source: S&P Capital IQ. Data as of March 31, 2015
5 | APRIL 2015 | Issue 8
Source: S&P Capital IQ. Data as of March 31, 2015
www.spcapitaliq.com
S&P CAPITAL IQ Credit Market Pulse
Movers and Shakers
In this month’s report we will focus our commentary primarily in this biggest movers section on Europe to better understand how the inception of the QE
program may have affected individual European companies. We also take a brief look at another major trend that unfolded since the last issue, namely how
risk has evolved in the Energy sector globally. For more details on North America or APAC Mature refer to the included table. In the interest of space we have
not included emerging markets below but that information can always be obtained by contacting us.
Region
Highest risk
Western Europe
SWX:VLRT
Valartis Group AG
(b-)
(7.62%)
ENXTPA:APR
April Société Anonyme
bbb „ aa
0.24% „ 0.02%
WBAG:VBPS
Österreichische VolksbankenAktiengesellschaft
aa- „ bb+
0.02% „ 0.60%
XTRA:AB1
Air Berlin PLC
(b-)
(5.42%)
NasdaqGS:VIP
VimpelCom Ltd.
ccc- „ bb26.52% „ 2.16%
LSE:TCG
Thomas Cook Group plc
a- „ bb0.08% „ 1.75%
LSE:SRP
Serco Group plc
(b)
(5.07%)
BIT:SPM
Saipem SpA
ccc+ „ bb
13.18% „ 1.05%
BDL:001179080
Quilvest S.A.
bbb+ „ b+
0.17% „ 3.28%
TSX:PWC
PWC Capital Inc.
(ccc+)
(9.85%)
NasdaqGS:GNBC
Green Bancorp, Inc.
c „ bb+
76.18% „ 0.60%
NYSE:SEE
Sealed Air Corporation
aaa- „ bbb+
0.01% „ 0.17%
NYSE:WAC
Walter Investment
Management Corp.
(b-)
(8.77%)
TSX:CWB
Canadian Western Bank
ccc „ bbb21.77% „ 0.52%
NYSE:ED
Consolidated Edison, Inc.
aaa „ a0.01% „ 0.11%
NasdaqGS:YRCW
YRC Worldwide Inc.
(b-)
(7.53%)
NasdaqGS:IBTX
Independent Bank Group, Inc.
b- „ bbb
8.80% „ 0.22%
NYSE:GPC
Genuine Parts Company
aaa „ a0.01% „ 0.09%
KOSE:A011200
Hyundai Merchant Marine Co. Ltd.
(b+)
(3.03%)
SEHK:883
CNOOC Ltd.
bb- „ a1.65% „ 0.08%
SGX:C6L
Singapore Airlines Limited
aaa „ bbb+
0.01% „ 0.19%
KOSE:A023530
Lotte Shopping Co., Ltd.
(b+)
(2.62%)
KOSE:A030610
Kyobo Securities Co., Ltd.
b „ bbb
4.36% „ 0.26%
SEHK:1929
Chow Tai Fook Jewellery
Group Ltd.
aa+ „ bbb+
0.01% „ 0.19%
ASX:MTS
Metcash Limited
(b+)
(2.61%)
SEHK:135
Kunlun Energy Company Limited
bb- „ a1.48% „ 0.09%
TSE:8337
The Chiba Kogyo Bank, Ltd.
a „ bb
0.06% „ 0.94%
ENXTPA:AF
Air France-KLM SA
(b)
(3.84%)
ENXTPA:APR
April Société Anonyme
bbb „ aa
0.24% „ 0.02%
ENXTPA:AREVA
Areva S.A.
a- „ bb+
0.10% „ 0.56%
ENXTPA:FNTS
Finatis SA
(bb-)
(2.00%)
ENXTPA:TEC
Technip SA
bb- „ bbb+
1.57% „ 0.14%
ENXTPA:BUR
Burelle SA
a+ „ bbb+
0.03% „ 0.19%
ENXTPA:ORA
Orange
(bb+)
(0.67%)
ENXTPA:SAN
Sanofi
a- „ aa+
0.08% „ 0.01%
ENXTPA:ORA
Orange
bbb+ „ bb+
0.14% „ 0.67%
XTRA:AB1
Air Berlin PLC
(b)
(5.42%)
XTRA:LXS
Lanxess AG
bbb- „ a+
0.42% „ 0.04%
DUSE:RLV
Rheinland Holding AG
aaa „ a+
0.01% „ 0.05%
DB:SZU
Suedzucker AG
(b+)
(3.19%)
DB:BAS
BASF SE
a+ „ aaa
0.05% „ 0.01%
DB:LHA
Deutsche Lufthansa
Aktiengesellschaft
bbb „ bb0.23% „ 2.02%
DB:LHA
Deutsche Lufthansa
Aktiengesellschaft
(bb-)
(2.02%)
DB:MLP
MLP AG
bb- „ bbb
1.75% „ 0.24%
DB:SZU
Suedzucker AG
bb+ „ b+
0.85% „ 3.19%
BIT:PEL
Banca Popolare dell’Etruria e del
Lazio-Società Cooperativa
(bb)
(1.11%)
BIT:SPM
Saipem SpA
ccc+ „ bb
13.18% „ 1.05%
BIT:EDNR
Edison S.p.A.
a- „ bbb0.12% „ 0.42%
BIT:SPM
Saipem SpA
(bb)
(1.05%)
BIT:BMPS
Banca Monte dei Paschi
di Siena S.p.A.
bb- „ bbb
2.07% „ 0.21%
BIT:BFE
Banca Finnat Euramerica S.p.A.
bbb- „ bb+
0.42% „ 0.57%
BIT:BFE
Banca Finnat Euramerica S.p.A.
(bb+)
(0.57%)
BIT:ITM
Italmobiliare SpA
b+ „ bbb2.48% „ 0.33%
BIT:US
UnipolSai Assicurazioni S.p.A.
bbb+ „ bbb
0.19% „ 0.26%
CATS:TEF
Telefónica, S.A.
(bbb-)
(0.38%)
CATS:ABG
Abengoa SA
bb „ a0.95% „ 0.10%
CATS:TEF
Telefónica, S.A.
bbb „ bbb0.21% „ 0.38%
CATS:LOG
Compañía de Distribución Integral
Logista Holdings, S.A.
(bbb)
(0.26%)
CATS:REP
Repsol, S.A.
bb+ „ a0.71% „ 0.08%
CATS:R4
Renta 4 Banco SA
bbb+ „ bbb+
0.17% „ 0.19%
CATS:FCC
Fomento de Construcciones y
Contratas, S.A.
(bbb)
(0.26%)
CATS:DIA
Distribuidora Internacional de
Alimentación, S.A.
bbb- „ a
0.34% „ 0.07%
CATS:IBE
Iberdrola, S.A.
a„a
0.06% „ 0.06%
North America
APAC Mature
France
Germany
Italy
Spain
Improvement
DeterioratioN
Source: S&P Capital IQ. Data as of March 31, 2015
www.spcapitaliq.com
APRIL 2015 | ISSUE 8 | 6
S&P CAPITAL IQ Credit Market Pulse
Movers and Shakers (contd.)
EUROPE
zz
At-a-glance, deteriorating Financials companies seem to outweigh improvers in Europe. Six unique companies appear in the deteriorations list while only
three appear in the improvements column. However, if we exclude relatively small movements of one notch or less, representing three deteriorations in Italy
and Spain we find the list balanced.
zz
Financials in Western Europe hit a trifecta with Highest PD (SWX:VLRT) from Switzerland, the biggest improvement already-mentioned ENXTPA:APR from
France and the biggest deterioration Österreichische Volksbanken-Aktiengesellschaft (WBAG:VBPS) from Austria. VBPS, which was made a bad bank and is
currently in run-off mode had a spike in PD levels during the quarter due to issuance to significant debt issuance of €60 Million.
zz
Germany’s and France’s biggest financial movers appear in-line the broader pattern in our QE analysis. France’s only Financial firm to make the lists
was also the biggest improver in Western Europe, April Société Anonyme (ENXTPA:APR) which moved six notches to ‘aa’ from ‘bbb’. None of France’s financial
firms appeared on the deteriorations list. Meanwhile Germany’s biggest Financials movers balanced-out with, MLP AG (DP:MLP) gaining four notches to a
credit score of ‘bbb’ from ‘bb-‘, while Rheinland Holding AG (DUSE:RLV) dropped an equal number of notches to ‘a+’ from ‘aaa-‘.
zz
Spain’s largest companies look especially healthy, with the highest PD for Telefónica, S.A. (CATS:TEF) still putting it squarely in investment grade territory
(‘bbb-‘) as measured by its mapped credit score. Moreover, companies in the table had Improvements which exceeded deteriorations by 13 to 1. Two of the
three deteriorating Spanish companies had no change in credit score and the biggest drop was one notch by Telefonica.
energy
zz
A striking change for Energy companies as only one, Italy’s Saipem SpA (BIT:SPM) with a relatively low 1.05% PD remains on the Highest PD list. Almost
a third of the biggest improvers (6 out of 21) came from the energy sector. Additionally the striking 10 notch drop in Green Bancorp, Inc., with its primary
business in the big-oil state of Texas likely adds another Energy-related improvement. This stabilization and improvement in risk levels is especially
interesting given that oil prices remain at relatively low levels.
About Credit Market Pulse
Each issue of Credit Market Pulse has three core sections, providing different views of credit risk. These include the quarterly evolution of the regional median
PDs; monthly evolution of the credit risk for constituents of a featured broad market equity index and its various industry sub-indices and PD tables for
highest risk and biggest movers of entities.
First section: the quarterly evolution of the median PD is shown for the last three years with a monthly blow-out for the most recent six months. Our charts
depict all listed companies headquartered in North America, Western Europe, Asia Pacific Mature as well as featured regions and countries. We exclude
non-financial companies that have revenues below $500M USD and financial companies with total assets under $1B USD. To arrive at the overall PD we
combine the non-financial and financial company medians using a simple average[1].
Second section: the PDs of a major market equity index and its various industry sub-indices are generated and aggregated into weighted average PDs and
the monthly evolution of the credit risk is shown for the last year with a weekly blowout for the most recent five weeks.[2] Please note that for S&P Capital IQ
subscribers, an Excel® template is available for users to replicate this section with other indices.
Third section: a table of individual companies that merit special attention. In this edition, we are featuring Highest PD companies and Biggest Movers[3] from
the three global regions as well as the Southern European countries of Portugal, Spain, Italy and Greece. For the global regions we look at companies with
revenues over $5B USD or Total Assets over $1B USD (for financial companies).
[1]
The median PD is preferred over the average PD because it is less sensitive to outliers. The revenue threshold is utilized because North America and some other developed countries and regions have higher concentrations of
small and micro-cap companies that negatively skew the credit view of the region (if they are included) when compared to the other regions. [2] Weightings are adjusted for companies that do not produce a PD value. [3] Biggest
movers are calculated based on the number of notches moved since the prior publication date (in this case from January 15, 2015 to March 31, 2015). Notches are based on the implied credit score which is calculated from the PD
using historical default transition table. Ties are broken based on PD percentage change—which is not used as the primary measure because it skews results significantly to lower risk companies.
Authors
Silvina Aldeco-Martinez
Managing Director,
Product & Market Development
EMEA,
S&P Capital IQ
Contact Us: www.spcapitaliq.com
The Americas | +1 212 438 7280
Marcel Heinrichs
Director,
Market Development Americas,
S&P Capital IQ
Thomas Yagel
Vice President,
Credit Market Development,
S&P Capital IQ
Asia-Pacific | +852 2533 3588Europe, Middle East and Africa | +44 (0) 20 7176 1233
021501
S&P CAPITAL IQ Credit Market Pulse
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021501