Market backdrop

Sentiment remained strong in July, as the theme of disinflation coupled with a soft landing made a
comeback. Spreads on EUR IG corporates were c15 bps tighter on the month to 147 bps. EUR IG corporate total returns were positive on the month (1.05%) as tighter spreads were partially offset by higher rates.


The fund’s NAV during the month (Z class, EUR) was up 1.71%. Performance has been driven by the outperformance of financials compared to nonfinancials (spreads 22 bps tighter compared to 10 bps tighter on non-financials) and Additional Tier 1s (AT1s) and Tier 2s of banks in particular. GBP-denominated bonds also outperformed EUR-denominated bonds, as UK rates rallied over the month and spreads tightened significantly on UK names.


Issuance was very light in July, with EUR 1 billion of green bonds issued from the European financial sector in a seasonally calm month (EUR 0.5 billion of supply in July 2022). Earnings were the key focus over the month, as a large number of European banks reported second quarter results. As expected, these have been strong, reflecting the tailwind from higher rates in terms of earnings and fortress balance sheets in the banking sector. As an example, BBVA reported a net profit of EUR 2 billion in Q2, which was up 11% year-on-year and 10% compared to Q1 – leading to a 16.9% return on tangible equity for the first half 2023

Common Equity Tier 1(CET1) was around 40 bps higher compared to end-22 at 13.0%, equivalent to ~EUR 15 billion of excess capital over regulatory requirements. The bank’s asset quality metrics remain sound, with no signs of significant deterioration
as Non Performing Loans remain low at 3.4% and loan loss provisions were stable compared to Q1. Customer deposits were up 2% compared to end22 at EUR 402 billion. We continued to see positive ratings action over the month, as Bank of Ireland was
upgraded by Fitch to BBB+, the second upgrade over the past two months. This brings the bank’s Tier 2s comfortably into Investment Grade (IG) territory, now both average IG and with two out of three IG ratings – fully eligible for IG indices. Deutsche Bank has also been upgraded by Fitch in July to A-, the fifth upgrade Marketing material for professional / institutional / accredited investors GAM Star Fund plc – GAM Sustainable Climate Bond of the bank since 2021 – highlighting the strong progress made around its turnaround


We remain positive going forward – with upcoming Q2 earnings from European banks expected to remain a catalyst for the sector. Earnings are expected to be strong, reflecting robust capital, resilient asset quality, the uplift in earnings from higher rates, and no issues around liquidity or deposit outflows. In brief, we believe the European financial sector remains one of the strongest sectors from a bondholders’ perspective.

With a yield (to next call) of around 5.8% and an average spread (G-spread) of circa 300 bps on the fund (compared to 4.4% / circa 160 bps for the EUR IG corporate market), we see this as an opportunity to capture high income with upside potential from tightening spreads. This is despite the high-quality bias of the fund (average bond rating of BBB+ / average issuer rating of A) and lower duration compared to EUR IG corporates (4.4 versus 4.5).

Green Product in focus

CaixaBank – Sydney Light Rail

Project features

  • Project type: Clean Transport
  • Location: Sydney, Australia
  • Project owner: Transport for NSW
  • Loan size: USD 700 million (CaixaBank’s portion unknown, refinancing)
  • Route length: 25 km
  • Estimated emissions avoided due to the project: 22,100 tons of CO2 per annum for 30 years

Interesting snippets

  • The project will generate economic activity of around AUD 4 billion and create 10,000 jobs
  • The green loan is to refinance the USD 700 million debt facilities of the project
  • The green loan is the first in New South Wales for a “Public-Private Partnership”
  • The green loan is the first Sustainable Financing signed in the APAC region for CaixaBank
    CaixaBank’s sustainability strategy highlights
  • Net Zero commitment by 2050 including the group’s lending portfolio
  • Granular approach to the group’s net zero pathway, including a focus on sectors with the most impact: Electricity (-30%
    emissions intensity by 2030 from 2020), and Oil & Gas (-23% financed emissions by 2030 from 2020)
  • CaixaBank’s insurance subsidiary is the first Spanish insurance company to join the Net Zero Asset Owners Alliance

  • The Valuation date: June 20, 2024
    120,240,618GAM Sustainable Climate Bond fundIE000BSJBO140.00400.0143-0.05700.401.43-5.70
    220,240,618GAM Star Crdt Ops EUR InvIE00B50JD354-0.00190.05960.5789-0.195.9657.89
    320,240,618GAM Star Crdt Ops GBP InvIE00B510J1730.00050.05110.85470.055.1185.47
    420,240,618GAM Star Crdt Ops USD InvIE00B57693100.00070.05090.77200.075.0977.20
    520,240,618GAM Interest Trend IncIE00BYM4P913-0.00050.04780.3207-0.054.7832.07

  • Please read this important legal information before proceeding.

    Information contained herein are solely for the use of the person who has accessed this information and may not be reproduced or distributed, even partially, to any other person or entity.

    The material contained herein is confidential and intended solely for the use of the persons or entities with nationality of or respectively with their residence, domicile, registered office or effective administration in a State or Country in which distribution, publication, making available or use of the information is not contrary to applicable laws or any other regulation.

    The material contained herein is aimed at sophisticated, professional, eligible, institutional and/or qualified investors/intermediaries who have the knowledge and financial sophistication to understand and bear the risks associated with the investments described.

    The information is solely product-related and does not take into account any personal circumstances and does not qualify as general or personal investment recommendation or advice. In particular, the information is given by way of information only and does not constitute a specific legal offer for the purchase or sale of financial instruments. Moreover, nothing contained herein is constitutive of any tax advice.

    Every effort has been made to ensure the accuracy of the financial information herein but the information contained herein has not been independently reviewed or verified. Therefore, Atlanticomnium SA gives no assurance, express or implied, as to whether such information is accurate, true or complete and no responsibility is accepted by Atlanticomnium SA for any errors or omissions. Third-party content is the property of its respective provider or its licensor and is protected by applicable copyright law.

    Past performance is not indicative of future performance. The price of shares/units and the income from the funds/trusts can go down as well as up and may be affected by changes in rates of exchange or financial markets fluctuation, out of the scope of Atlanticomnium SA.

    To the fullest extent permitted by law, in no event shall Atlanticomnium SA or our affiliates, or any of our directors, employees, contractors, service providers or agents have any liability whatsoever to any person for any direct or indirect loss, liability, cost, claim, expense or damage of any kind, whether in contract or in tort, including negligence, or otherwise, arising out of or related to the use of the information provided.