The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.
CAPITAL MARKETS

Hybrid debt: Brazilians stock up on subordinated debt

More tier 2 issues expected; Capital-raising to support loan growth

 

average capital adequacy ratio of Brazil’s banks

Subordinated debt is falling out of favour in the US and Europe but in Brazil several banks have recently tapped the market, taking advantage of investors’ search for yield. The country’s second-biggest private bank, Bradesco, and mid-tier player Banco BMG have both issued tier 2 debt this quarter. State-owned Banco do Brasil sold a tier 1 perpetual bond.

Investment bankers expect further transactions, especially from mid-tier institutions as much for fundraising reasons as to bolster their balance sheets, which are relatively strong anyway.

"I believe that we will see other mid-sized banks tapping the tier 2 market," says Pedro Guimarães, head of fixed income at BTG Pactual. "A series of mid-tier banks made initial public offerings in 2007/08, which gave them BIS ratios of 30% plus. [The ratio gives an indication of the solvency of a bank.] Now these banks want to raise more money. Without access to retail deposits they need to issue debt in the market."

Secondary struggle
Banco BMG sold $300 million in tier 2 bonds in late October during challenging market conditions.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree