December 5, 2017 / 10:20 AM / in 12 days

Global AT1 Issuance Slows in 3Q17; APAC Dominates

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Banks AT1 Dashboard December 2017 here LONDON, December 05 (Fitch) Global Additional Tier 1 (AT1) issuance fell 7% yoy in 9M17 to USD49 billion as 3Q17 volumes did not match the surge in the previous year. Including USD9.3 billion issued in 4Q17 to date, the full year amount looks to remain below last year's total volume of USD72 billion. APAC banks raised 63% of the 3Q17 total AT1 and CoCo volumes, slightly increasing their market share to 43% of overall issuance. Fitch expects further issuance from banks in APAC to support balance sheet growth, including in situations where it is more expedient to issue AT1 capital securities than to issue common equity. Close to USD100 billion has been issued by Chinese banks to date, representing around two thirds of total APAC volumes, with the remainder primarily from Japanese and Indian banks. In EMEA the largest banks have already built significant AT1 buffers, especially in jurisdictions with a high AT1 regulatory allowance, so Fitch expects issuance in 2018 increasingly to come from banks that have so far been less present on AT1 markets. EU banks' long-term funding issuance plans in 2018 are likely to include some AT1, but we expect that more senior minimum requirement for eligible liabilities-qualifying instruments will dominate (eg non-preferred senior). Globally, small and medium-sized banks remained active issuers of AT1 in 3Q17, taking up 37% of the USD21 billion funds raised and participating in 79% of the transactions during the quarter. Fairly low aggregate amounts of AT1 in smaller banks' fully loaded capital composition indicate further room for issuance. AT1 spreads continued to narrow, in part driven by several banks raising fresh equity throughout the year and, seemingly, the reassessment by some market participants of non-performance risk following the simultaneous jump to default of Banco Popular Espanol's AT1s (without previously omitting a coupon) and Tier 2 debt in the summer. Fitch's updated AT1 Tracker includes 356 capital instruments with numerical write-down or conversion triggers, totalling USD331 billion. The accompanying Dashboard also includes country- and bank-specific commentary including on regulatory developments and drivers AT1 coupon omission and write-down risks. Contact: Christian Scarafia Senior Director +44 20 3530 1012 Fitch Ratings Limited 30 North Colonnade London E14 5GN Ioana Sima, CFA Associate Director +44 20 3530 1736 James Longsdon Managing Director +44 20 3530 1076 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. 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