An index of AT1 bonds issued by Asia ex-Japan issuers has fallen about 5.4% YTD as compared to an 18% slump in a Bloomberg index for global counterparts. This has also outperformed a 13.8% fall for all kinds of fixed-income securities globally. Bloomberg notes that Asian banks’ AT1s have also lost less than the 11% drop witnessed by a broader Asia dollar bond index. With European AT1s accounting for a large chunk of the global AT1 index, those of HSBC, SocGen and Credit Suisse have each lost more than 20% YTD, they note. The combined loan loss provisions of the top 10 listed Euro-area banks are set to rise 36% to $34.7bn in 2022 as per analyst estimates. On the other hand, many APAC banking sectors have solid non-performing loan coverage, notes Bloomberg banking analyst Francis Chan. Adding to the advantage of Asian banks is the relatively lower reliance on investment banking income as compared to global peers. Also, the average CET1 ratio for Asian banks with outstanding AT1s is ~14.2% vs. 12.2% for the top six US banks and 13.6% for the top 6 European banks, showing more defensive credentials. CreditSights analysts wrote that around two-thirds of European banks’ AT1 are pricing in some extension/non-call risk (Term of the Day, explained below) while Asia did not have the same risk. To learn more about AT1s/CoCo bonds, click here.An index of AT1 bonds issued by Asia ex-Japan issuers has fallen about 5.4% YTD as compared to an 18% slump in a Bloomberg index for global counterparts. This has also outperformed a 13.8% fall for all kinds of fixed-income securities globally. Bloomberg notes that Asian banks’ AT1s have also lost less than the 11% drop witnessed by a broader Asia dollar bond index. With European AT1s accounting for a large chunk of the global AT1 index, those of HSBC, SocGen and Credit Suisse have each lost more than 20% YTD, they note. The combined loan loss provisions of the top 10 listed Euro-area banks are set to rise 36% to $34.7bn in 2022 as per analyst estimates. On the other hand, many APAC banking sectors have solid non-performing loan coverage, notes Bloomberg banking analyst Francis Chan. Adding to the advantage of Asian banks is the relatively lower reliance on investment banking income as compared to global peers. Also, the average CET1 ratio for Asian banks with outstanding AT1s is ~14.2% vs. 12.2% for the top six US banks and 13.6% for the top 6 European banks, showing more defensive credentials. CreditSights analysts wrote that around two-thirds of European banks’ AT1 are pricing in some extension/non-call risk while Asia did not have the same risk. To learn more about AT1s/CoCo bonds, click here.
Asia ex-Japan AT1s Outperform Global Counterparts YTD
