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Capital Markets

AT1: Tourism picks up for yield hunters

The AT1 market has grown to almost $200 billion equivalent, with perhaps $20 billion equivalent of net new issuance to come from banks filling P2R buckets with lower-quality capital than CET1.

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Whisper it, but additional tier-1 capital is becoming rather mature. The question now is whether or not it becomes a crowded trade.

More corporate high-yield buyers and equity income funds searching for anything offering a decent yield are likely to be tempted by these still niche and – so typical of the banking industry – over-engineered instruments that want to look like equity to regulators, accountants and rating agencies, but like bonds to investors.

“In a year of extraordinary volatility, the investor base has stayed quite stable and resilient,” says Eric Meunier, global head of debt capital markets financial origination at Societe Generale Corporate & Investment Banking.

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