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“美版AT1债券”遭抛售!危机未除,美国银行优先股遭重挫

The “US AT1 bond” was sold off! The crisis has not been resolved, and Bank of America's preferred stock has suffered a severe setback

Zhitong Finance ·  May 8, 2023 17:58

Source: Zhitong Finance
Author: Wei Haoming

Investors are selling preferred stocks at an unprecedented rate as concerns about the health of regional banks in the US grow. The $12.2 billion iShares exchange-traded fund (ETF), which tracks the preferred stock market, fell 5.1% last week, one of the biggest declines since the global financial crisis.

Preferred shares are a type of hybrid security that is popular with banks because they help meet capital requirements without diluting shareholders' equity.But now, the market is being disrupted due to sell-offs triggered by regional bank failures. Preferred stocks issued by banks are running at their slowest pace since 2018, and fund managers say trading in the secondary market is a challenge.

Allen Hassan, head of preferred stock trading at Ziegler Capital Markets, said, “If preferred shares are not issued and capital is expected from the market, people will ask 'What should you do? ' I feel like everyone isn't very confident.”

Traders think that the current market is a market with insufficient liquidity, making it difficult to control, and there is a huge gap in prices every day. They said,Part of the reason is that, given the recent collapse of a series of regional banks, few people are willing to buy riskier preferred stocks.

$First Republic Bank (FRCB.US)$Quilt$JPMorgan (JPM.US)$Following the acquisition, its preferred shares were effectively erased.$First Horizon National (FHN.US)$Giving up and$The Toronto-Dominion Bank (TD.US)$After the merger, its preferred stock plunged 26% in a week. The stock is currently priced at $17.4, which is slightly less than 70% of face value. According to long-term observers such as Collin Martin, director and fixed income strategist of Schwab & Schwab Wealth Management, this is the biggest decline since the global financial crisis.

Large investors are also dropping out one after another.Cohen & Steers cut its exposure to preferred shares of regional banks, while Spectrum Asset Management, founded by outspoken market veteran Mark Lieb, sold First Republic Bank's preferred shares a few weeks before it went bankrupt.

Preferred shares are liquidated ahead of common stock, but are lower than all types of debt, and pay hefty dividends. These securities are usually permanent, but they are often redeemed early if banks can replace them at lower interest rates.However, according to an ICE Bank of America index, since the current effective rate of return is at its highest level in 12 years, analysts said that banks are more likely to give up redemption options.

Martin of Charles Schwab said that in the current market, refinancing is too expensive, even though most large US banks currently do not need to raise new capital. But for smaller banks, this could mean trouble. They rely on preferred shares to meet regulatory requirements, and they have actually been shut out of the market because investors demand extremely high dividends.

In the US, preferred shares are equivalent to Eurobank Tier 1 bonds (AT1 bonds) with additional capital, recently$Credit Suisse (CS.US)$Preferred stocks drew attention after clearing a record $17 billion in AT1 bonds. Unlike preferred stocks, AT1 bonds have more complex mechanisms that force bond holders to bear losses during times of stress, including conversion to common stock or loss of principal.

According to data collected by the media, the average face value of exchange-traded preferred shares subscribed for the first time this year and next year is more than $3 lower than the face value of $25, which indicates that more banks may not sell them.

Even so, some investors are still searching for opportunities in the ruins. The iShares Preferred Stock ETF rebounded 1.5% on Friday, the first increase in 5 days. Hassan said:“You have to buy them when the water is hot. This type of product would be the cheapest securities on the market. There will be a lot of money to be made.”

Editor/hoten

The translation is provided by third-party software.


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