Deutsche Bank, UniCredit CoCo Coupons at Risk, CreditSights Says
- Last year’s losses eat into ability to pay optional coupons
- Issue at Deutsche Bank differs from problem at UniCredit
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Deutsche Bank AG, UniCredit SpA and two smaller banks risk being unable to pay interest on their riskiest bonds, raising the specter of a repeat of the turbulence that roiled the market in the first quarter of 2016.
The two lenders, both among the world’s biggest institutions, plus Spain’s Banco Popular SA and Germany’s Bremer Landesbank AG, had losses last year that may put them in breach of regulatory limits on discretionary payouts, according to analysts Simon Adamson and Puja Poojara at CreditSights in London. While all four probably will be able to pay, the fact it’s an issue highlights the risks in holding contingent convertible, or CoCo, bonds, Adamson said in a telephone interview.