Credit Suisse Group AG (CSGN) raised A$1.25 billion ($1.17 billion) with its biggest-ever bond sale in Australia as it returned to the market after an almost four-year hiatus, data compiled by Bloomberg show.
Switzerland’s second-biggest lender joins banks from Europe and around the world that are flocking to the market, with the U.K.’s Barclays Plc (BARC) and Emirates NBD PJSC also ending multi-year absences in 2014, data show. Debuts this year by overseas lenders include ABN Amro NV of the Netherlands and China’s Bank of Communications Co. Credit Suisse last sold bonds in the market in August 2010 when it placed A$600 million of five-year floating-rate notes.
Unprecedented easing by the European Central Bank has helped repair balance sheets of lenders in the euro area and neighboring financial hubs, after the global crisis triggered trading losses and regulatory fines. Demand for bonds in Australia is exceeding supply, driving credit spreads on bank debentures to the narrowest level in more than six years.
“Sentiment here towards Europe is more positive than it has been for a few years,” Brendon Cooper, a director of credit strategy at Westpac Banking Corp. in Sydney, said by phone yesterday. “There’s a lot of demand at the moment in the Australian credit market and there’s a shortage of paper, so investors are looking for opportunities to add diversity.”
The volume of today’s deal exceeds the A$1.1 billion of securities sold by Credit Suisse in March 2010 that matured earlier this year, according to data compiled by Bloomberg. The sale included A$650 million of fixed-rate securities and A$600 million of floating-rate notes, according to an e-mailed statement from Commonwealth Bank of Australia, which managed the sale along with Australia & New Zealand Banking Group Ltd, Credit Suisse and National Australia Bank Ltd.
The five-year senior unsecured notes were priced to yield 103 basis points more than swap rates. The offering of July 2019 notes had earlier been marketed at a spread of 105 basis points, according to two people familiar with the matter who asked not to be identified because the details were private.
Bond sales in Australia by foreign banks climbed to A$7.98 billion in the first half, up 4.1 percent from the year-earlier period and the most since 2011, data compiled by Bloomberg show. Of that, A$4.5 billion was borrowed by European banks and their local branches, a 123 percent increase.
Barclays, the U.K.’s second-largest bank, raised A$1.3 billion in the Australian market in March, its first such transaction since February 2011. Emirates NBD’s A$400 million raising last quarter followed a seven-year absence.
Bank of Communications this month borrowed A$350 million in its inaugural transaction, while Banco Santander Chile (BSAN) and First Gulf Bank PJSC also debuted this year.
Today’s Aussie dollar-denominated sale by Credit Suisse follows a series of transactions in other markets by the Zurich-based bank, including a 500 million pound ($856 million) raising this week and a $5 billion benchmark sale in May.
It also sold last month $2.5 billion of subordinated notes as the Swiss National Bank urged lenders to boost capital to safeguard against risks including litigation, after Credit Suisse pleaded guilty in a U.S. tax investigation.
Credit Suisse Group carries an A- credit rating, the seventh-highest score at Standard & Poor’s, with a negative outlook. Moody’s Investors Service rates it the equivalent of one level higher at A2, also with a negative outlook. Credit Suisse AG, the entity that the group is issuing the notes through, has long-term ratings one level higher, with scores of A at S&P and A1 at Moody's.
The average yield premium over swap rates for bank bonds in Australia fell as low as 90 basis points on July 7, a level unseen since February 2008, according to Bank of America Merrill Lynch indexes. It was 91 yesterday, 32 below its level a year earlier. The spread for similar debt in Europe was at 89 basis points, 8 above the more than six-year low it reached in May, a separate index showed.
“Issuance for some of those European banks looked more expensive from an issuer’s perspective in the past few years,” Vivek Prabhu, who helps manage about A$5.4 billion as deputy head of credit and fixed income at Perpetual Ltd. in Sydney, said by phone yesterday. “With credit having rallied, the difference between their home markets and what’s available in Australia has crunched in, and that means it now makes more sense to borrow here.”
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