Bank Capital Raising: The ever more popular preference

In these acquisitive times, a bank needs to find a cost-efficient means of funding its ambitions. In the recent takeover squabble for Belgium’s Générale de Banque, ABN Amro suggested that it would issue $1 billion worth of preferred stock in order to help fund its, ultimately unsuccessful, bid.

For European banks, issuing preferred or capital securities promises to be an increasingly popular strategy, not only to fund acquisitions but also to shore up regulatory capital. Because in the right light regulators see preferred securities as tier-one capital, and accountants see the dividends payable on the securities as tax-deductible.