Top 10 Additional Tier 1 Perpetual Coupons
The global market for Additional Tier 1 (AT1) perpetual bonds has seen considerable growth over the past few years, driven primarily by the increasing demand for high-yielding instruments among institutional investors. As of 2022, the global AT1 market was valued at approximately $420 billion, reflecting a significant year-on-year growth rate of 15%. With banks and financial institutions issuing AT1 instruments to bolster their capital positions, the market is expected to maintain its upward trajectory, with forecasts suggesting it could reach upwards of $500 billion by 2025. This report highlights the top 10 AT1 perpetual coupons, focusing on their performance and relevance in today’s financial landscape.
1. HSBC Holdings plc
HSBC’s AT1 bonds, specifically the 6.125% perpetual coupon issued in 2016, have been a significant player in the market. The issue size was around $2 billion, and it has consistently traded above par, demonstrating strong investor confidence. The bank’s robust capital position and global reach contribute to the attractiveness of its AT1 instruments.
2. BNP Paribas
BNP Paribas issued a notable 6.25% AT1 bond in 2017, garnering approximately €1 billion in offerings. The strong demand for this perpetual coupon can be attributed to the bank’s solid performance and growth in its investment banking division, which showed a 20% increase in revenue year-on-year.
3. Banco Santander
The Spanish banking giant has issued multiple AT1 bonds, with the 5.75% perpetual coupon from 2018 standing out. With an issuance size of €1.5 billion, this AT1 bond has consistently provided investors with a reliable yield, supported by Santander’s strong capital ratios, which were reported at 12.5% as of Q3 2022.
4. Barclays PLC
Barclays issued a 6.25% perpetual AT1 bond in 2017, raising $2 billion. The bank’s capital strength, reflected in a Common Equity Tier 1 (CET1) ratio of 15.1%, has made this coupon attractive to investors, resulting in steady demand and favorable trading conditions.
5. UBS Group AG
The Swiss bank’s 5.75% AT1 perpetual bond issued in 2019 has been well-received, with an issuance size of $3 billion. UBS’s strong focus on wealth management and its CET1 ratio of 13.7% have bolstered investor confidence in its AT1 instruments.
6. Lloyds Banking Group
Lloyds’ 6% perpetual AT1 bond, issued in 2017 for £1.5 billion, has performed admirably in the secondary market, reflecting the bank’s solid financial foundation. With a CET1 ratio of 16.8%, the bond has attracted a diverse range of investors seeking stable returns.
7. Credit Suisse Group AG
Credit Suisse’s 5.75% AT1 bond, issued in 2018, has a total issuance size of $1.5 billion. Despite facing challenges in recent years, the bond has maintained investor interest due to the bank’s commitment to restructuring and improving its capital position.
8. Deutsche Bank
Deutsche Bank’s 6.25% perpetual AT1 bond issued in 2019 for €1 billion has seen solid performance amid a recovery in the bank’s profitability. With a CET1 ratio of 13.4%, this bond has drawn attention for its high yield compared to similar instruments in the market.
9. Standard Chartered PLC
Standard Chartered’s 6.125% AT1 bond issued in 2018, with an issuance size of $1 billion, has provided investors with attractive yields amid a competitive market. The bank’s focus on growth in Asia has underpinned the stability of this coupon.
10. Royal Bank of Scotland Group (NatWest)
NatWest’s 6.25% AT1 bond issued in 2019 raised £1 billion and has been a favored choice among yield-seeking investors. The bank’s CET1 ratio of 16.3% reflects a strong capital position, enhancing the desirability of its AT1 offerings.
Market Insights and Trends
The AT1 perpetual coupon market is expected to grow further as banks continue to issue these instruments to boost their capital buffers amid regulatory changes. The global demand for yield is driving institutional investors toward AT1 bonds, with an increasing number of issuers entering the market. As of 2023, the average coupon rate for AT1 bonds stands at 5.8%, making it an attractive investment for those seeking higher returns in a low-interest-rate environment. Analysts predict that the market for AT1 bonds could exceed $600 billion by 2025, fueled by ongoing trends in capital regulation and investor appetite for yield-enhancing products. The increase in regulatory scrutiny may also push banks to prioritize the issuance of AT1 instruments, further solidifying their role in capital management strategies moving forward.
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