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Nationwide senior deal tightens in secondary

Reuters - UK Focus

By Will Caiger-Smith

NEW YORK, July 21 (IFR) - Nationwide Building Society (LSE: CCDS.L - news) 's US$1.25bn five-year senior bond traded 10bp tighter in secondary on Thursday, demonstrating further improvement in sentiment towards UK banks.

The bonds were trading at 125bp over Treasuries. They priced on Wednesday at T+135bp - the tight end of guidance and inside IPTs of T+155bp area - implying a new issue concession of 4bp.

Buyers placed US$3.6bn of orders for the transaction.

"It (Other OTC: ITGL - news) 's an ongoing sign of investors becoming more comfortable with UK risk," said a syndicate banker not involved in the deal.

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"We now have a pretty solid footing for UK bank senior," he added.

Some observers said that although Nationwide (LSE: NBS.L - news) 's substantial exposure to the UK residential real estate market was an area of concern, it was still a fundamentally strong credit.

"Even (Taiwan OTC: 6436.TWO - news) though Nationwide is almost exclusively exposed to the UK, it is a strong, defensive credit well placed in the robust UK mortgage market," said Puja Poojara, a senior analyst at CreditSights.

"Having said that, in the context of Brexit, we'll have to keep a close eye on developments in the residential mortgage market, and as such house prices."

The Nationwide deal is the second in dollars from a UK bank since Britain voted to leave the European Union on June 23.

Lloyds Banking Group (Other OTC: LLOBF - news) reopened the market with a US$1bn five-year senior holdco bond on June 30, attracting US$7bn of orders and pricing with a new issue concession of 15bp. (Reporting by Will Caiger-Smith; editing by Shankar Ramakrishnan)