National Australia Bank turned to Singaporean investors for capital on Thursday, selling the latest in what is quickly becoming a barrage of deals for the city-state’s yield-hungry investors.
The bank turned to Singapore dollar investors only a day after United Overseas Bank and Societe Generale sold their own subordinated deals in the currency, sparking back to life a bank capital market that has only hosted two other deals so far this year.
NAB priced the S$450m ($328.9m) 12-year non-call seven Tier 2 bond to yield 4.15% or 203bp over the seven-year Singapore Swap Offer rate (SOR).
DBS, OCBC and NAB were joint bookrunners of the bond, which was marketed with initial guidance around the 4.3% area. By mid-afternoon, after building a book worth around S$1.2bn, the leads told investors the bond would price at 4.15%. Few investors pulled their orders after the final revision according to syndicate bankers.
The closest comparables were similarly rated 12 non-call seven deals for Westpac and ANZ, which came to market last year.
Westpac has a 4% August 2027 deal, which was trading on a mid yield-to-call around the 3.8% mark on Thursday, or roughly 165bp over swaps. ANZ has a 3.7% March 2027 bond trading, which was also trading around the 3.8% level according to one credit analyst.
After adjusting for the difference in maturity - the first call for both deals will be in 2022, a year before NAB’s deal - fair value for NAB’s issue worked out at somewhere between 3.9% and 4%, the credit analyst said. This was roughly in line with where the leads saw fair value.
While the pricing looked attractive for investors, bankers also said NAB walked away happy given swap rates had declined in the morning. They said this enabled NAB to price inside other offshore markets.
One banker said the final price equated to about 245bp over dollar Libor if swapped into dollars.
This rate looks particularly attractive compared to the initial price guidance for a dollar-denominated Tier 2 deal by ANZ, which was also in the market on Thursday. This comprised a 10-year bullet deal that was being offered in the high 200bp area over Treasuries.
The Australian banks are well known for spreading their issuance plans far and wide to get diverse and often cheaper forms of capital.
ANZ and Westpac both turned to the offshore renminbi market for capital last year: ANZ sold a Rmb2.5bn 10-year non-call five deal last January, while Westpac raised Rmb1.25bn with the same structure the following month.
NAB’s transaction came just one day after bankers predicted a raft of Singapore dollar bank capital deals, following the success of issues from UOB and Societe Generale.
That prediction came good remarkably quickly. But with cross-currency swaps offering attractive levels, and local investors proving hungry for yield, bankers think there are plenty more to come.
