Foreign Banks Flock Down Under Where Bond Buyers Crave Variety

  • Bond issuance by overseas lenders climbs to A$21.6 billion
  • Total volume raised in 2015 is the most in five years

Foreign banks from Bank of China Ltd. to Goldman Sachs Group Inc. have been raising money in Australia’s bond market at the fastest pace in five years in 2015.

Investors craving alternatives to the country’s four major banks have this year embraced deals from 23 separate banks headquartered offshore. The A$21.6 billion ($15.5 billion) lenders raised Down Under in 2015, either through local or overseas units, is the largest annual volume from foreign banks since 2010, according to data compiled by Bloomberg.

Offshore firms such as Sumitomo Mitsui Banking Corp. and China Construction Bank Corp. have issued in Australian dollars to diversify their funding sources. Others use the money to finance local lending operations, which grew by 9 percent in the 12 months through October, according to data from the prudential regulator.

“Foreign financials issuing into Australia through both domestic branches and Kangaroos has been constructive,” said Tom Irving, Singapore-based head of the Asian debt syndicate at Toronto-Dominion Bank’s TD Securities unit. “We are going to continue to see developments on the regulatory side, which is going to mean that that sector grows.”

The following charts illustrate issuance patterns by foreign banks in Australia and how they compare with other years and sectors.

CHART 1: Royal Bank of Canada was the biggest seller of bonds in Australia in 2015, raising A$3.12 billion since Dec. 31, while Rabobank was the second largest at A$2.57 billion, the data show. Credit Suisse Group AG placed A$2 billion of notes.

CHART 2: While the volume of paper from foreign lenders increased 12 percent from last year, the number of issuers declined to 23 from 29, data compiled by Bloomberg show.

CHART 3: Foreign banks represented about a third of the money raised in the Australian bond market this year by companies, excluding government-backed issuers. Commonwealth Bank of Australia, Westpac Banking Corp., Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. remained the dominant presence, selling 35.9 percent of notes.

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