Fixed Income Daily Market Update

CMBI Credit Commentary Fixed Income Daily Market Update固定收益部市场日报 Asian IG credits were unchanged to 2bps wider this morning. We saw betterselling on MEITUA and Korean IG names. NWDEVL 4.8 Perp was 0.8pthigher. YPCORP 29/VLLPM 29 were 0.6pt lower. HYSAN 4.85 Perp leaked0.5pt. Glenn Ko, CFA高志和(852) 3657 6235glennko@cmbi.com.hk FABUH:FY25 net profit surged 24% yoy to AED21.1bn from higher incomeacrossall segments. See below. Cyrena Ng, CPA吳蒨瑩(852) 3900 0801cyrenang@cmbi.com.hk ADSEZ: Adani Ports committee approved tender offer to purchase up toUSD345.137mn of ADSEZ 4 07/30/27 and up to USD150mn of ADSEZ 3.102/02/31. ADSEZ 27-29 edged 0.3pt higher this morning. Yujing Zhang张钰婧(852)3900 0830zhangyujing@cmbi.com.hk Trading desk comments交易台市场观点  Yesterday, in the FRN space, we saw buying interests from real-money andPB accounts seeking to lock in yields before the upcoming Chinese New Yearholidayon Australian,Chinese,European,Japanese and Koreanbank/corporate FRNs. In the Middle East, BSFR6.375 Perp and BSFR 35edged 0.1pt higher; we maintain buy on these two issues. See our commentson BSFRyesterday. FABUH 34-35s wereunchanged to 0.2pt higher. Seecomments on FABUH’s FY25 net profits surge below. Meanwhile, global real-money and PB accounts sold long-end KSAs and long-dated China TMTpapers, notably those with maturities longer than 20 years. In Greater Chinahigher-yielding space, WESCHI 28/LIFUNG 5.25 Perp closed 0.3-0.4pthigher. However, FAEACO 12.814 Perp/EHICAR 26-27 were down by 0.1-0.3pt.In Chinese properties, VNKRLE ‘27 and ‘29 led the space and rose1.3-1.6pts. YTD, VNKRLEs have surged 10.4-11.0pts, supported by anRMB2.36bn (cUSD339mn) loan from SZ Metro, as well as Vanke’s upfrontcash payment for three domestic notes totaling RMB6.8bn (cUSD976mn).Fitch upgraded China Vanke to CC from RD on completion of distressed debtexchange, and affirmed Vanke HK’s CCrating. FUTLAN 28/FTLNHD 27were unchanged to 0.2pt higher, while FTLNHD 26 was 0.2pt lower. Seazenexpects to get an offshore-debt quota before Chinese New Year and couldlaunch a USD bond offering afterwards to partially refinance its USD400mnFTLNHD 26.DALWAN 28s were unchanged to 0.1pt higher.In SE Asianspace, VLLPM 27-29 dropped 1.0-1.6pts. ACPM 3.9 Perp was 0.7pt lower.On the other hand, INDYIJ 29/IHFLIN 27-30/VEDLN 28-33s and the ReNewEnergy complex were unchanged to 0.2pt higher. GLPSPs traded0.2-0.3pthigher.Yankee AT1s recovered by 0.1-0.4pt. LGFVs were stable amid lighttwo-way flows from retail accounts, whilst institutional interests were mild. Last Trading Day’s Top Movers Marco News Recap宏观新闻回顾 Macro–S&P (+0.47%), Dow (+0.04%)and Nasdaq (+0.90%) were higher on Monday. 2/5 year UST yield waslower on Monday. 2/5/10/30 year yield was at 3.48%/3.75%/4.22%/4.85%. Desk Analyst Comments分析员市场观点 FABUH:FY25 net profit surged 24% yoy to AED21.1bn from higher income across all segments We maintain buy onFABUH 6.32 04/04/34 and FABUH 5.804 01/16/35, which offer c60bps yield pick-up overits senior unsecured bonds for similar tenor. We believe the likelihood of First Abu Dhabi Bank (FAB) to call itsT2s to on their respective first call dates is high given FAB’s adequate capital buffer. FAB called its first USDAT1, FABUH 5.25 Perp, on the first call date in Jun’20. The next USD AT1 callable is FABUH 4.5 Perp in Apr’26.See below for our AT1 and T2 picks within the Middle East space. In FY25, FAB’s operating income rose 16% yoy to AED36.7bn, mainly driven by 36% yoy increase in non-interest income to AED16.4bn. Growth was supported byhigher fee and commission income, as well as higherFX and other investment income. Net interest income increased by 4% yoy to AED20.3bn, supported by 15%yoy growth in gross loan to AED633bn despite NIM declined to 1.84% in FY25 from 1.93% in FY24 amid alower-rate environment. UAE cut interest rate 3 times with 25bps each in Sep, Oct and Dec’25. Cost-to-income ratio dropped to 22.4% in FY25 from 24.6% in FY24, reflected disciplined cost management.Net impairment charges fell 17% yoy to AED3.3bn, as supported by a stronger macro-economic environment,and net profit rose 24% yoy to AED21.1bn. ROTE improved to 19.2% from 16.8% in FY24, exceeded themanagement guidance of higher than 16%, and FAB maintained the same ROTE guidance in FY26. Asset quality improved with NPL ratio declining to 2.2% as of Dec’25 from 3.4% as of Dec’24, while NPLcoverage ratio increased to 108% from 96%. Moreover, FAB’s capital adequacy remained solid. CET1 pre-dividend ratio at 14.5% as of Dec’25, strong organic capital generation offset higher RWA. CET1 post-dividendratio was 13.3%, down from 13.7% as of Dec’24, still above theregulatory minimum requirement of 11.6%. FAB guidedCET1 ratio to be above 13.5% in FY26.Webelieve that the increase in countercyclical buffer to0.5% from 0.15% from 1 Jan’26 to have limited impact to FAB, and the CET1 ratio regulatory minimumrequirement will be increased to c12% from 11.6%.Furthermore, FAB’s Tier 1 ratio