Magazine article American Banker

Low Rates Bring Flurry of Bank Debt Issues

Magazine article American Banker

Low Rates Bring Flurry of Bank Debt Issues

Article excerpt

The latest drop in interest rates has triggered a flurry of bank and thrift debt issues this month, despite continued sluggish lending activity.

Seven offerings have come to market so far in 1992, from four issuers: J.P. Morgan & Co., Bankers Trust New York Corp., Golden West Financial Corp., and Fleet/Norstar Financial Group.

Others are poised to follow suit, once they report fourth-quarter earnings, experts say.

"I expect 1992 to look like the second half of last year," when activity really picked up, said one capital markets specialist.

Not Like Last Year

This month contrasts sharply with the first month of 1991. BankAmerica Corp. was the only bank to tap the public debt markets last January, for $100 million, and it waited until the end of the month to do so.

With only half the month gone, January's seven offerings already total more than $1 billion (see chart). Bankers Trust and Morgan have tapped the market repeatedly, with Bankers Trust issuing both bank-level and holding company debt.

Public offerings are only part of the picture. Banks have been actively borrowing through private avenues as well.

Chase Manhattan Corp. is said to be posting rates at which it would be willing to issue medium-term notes, for example. Bank of Scotland is said to have privately placed $200 million in 12-year subordinated debt.

Low Cost Is Main Motive

Today's low rates are the main lure for banks, according to Thomas Robards, executive vice president and treasurer of Republic New York Corp. His bank issued $1.5 billion in bank notes at the end of last year.

"You're seeing rates you haven't seen in about 15 years," he said. His bank's latest offering, a one-year deal, was priced with a coupon of just 4.5%.

Replacements of old debt will also help stimulate the flow of new offerings.

Consider Citicorp's situation. …

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