As sentiment around banks improves, and the prospect of interest rates to rise it’s become increasingly difficult to disregard the potential of AT1 CoCos. Its history of providing portfolios with some cushion in a rising rate environment is sure to be an attractive proposition for investors.
The European banks are having nothing but trouble in the last few months. And if they needed something else to further cloud their outlook – negative interest rates, meagre margins, increasing capital demands…- doubts have begun to emerge lately over whether the sector can continue to pay the high interest on the so-called CoCos (Contingent Convertible Capital Instruments), contingent convertible bonds.
MADRID | The Corner | Spanish biggest bank Santander announced a bond issue contingent convertible (Coco) by an amount of €2.5 billion, which will be directed exclusively to qualified investors. Another Spanish company seeking financing in the capital markets is construction firm ACS, issuing of €500 million debt, which that was forced to suspend it some weeks ago due to the Portuguese bank Espirito Santo scandal.
MADRID | The Corner | Santander will issue contingent convertible bonds (CoCos) worth up to 1,500 million euros. In order to reach its aim, the bank will start a road show to sound out the market interest and, in case of suitable conditions, it will start the operation on Monday or Tuesday next week with the collaboration of Credit Suisse, HSBC, JP Morgan, Société Générale and UBS. This issue of CoCos will be the third that the Spanish bank carries out this year, after the issue of 1,5000 million euros in March at an interest rate of 6.25% and another one in May when it sold CoCos worth 1,500 million dollars at 6.375%.
MADRID | By The Corner | European banks have strenghtened their capital ratios for the upcoming stress tests and the AQR, whose results will be known after the summer. In that sense, between July 2013 and May 2014, EZ lenders increased their base capital by €45 billion, although it wasn’t entirely by issuing shares but contingent convertible bonds (CoCos), by which they would have raised around €35 billion.