Enda Curran The Wall Street Journal November 01 2012
SUNCORP Group is taking the fight to Australia's big banks in the race to tap demand for Aussie dollar-denominated debt.
The regional Australian lender has made a dash for the covered bond market, demonstrating smaller borrowers too can use a funding tool mainly utilised by the country’s big four banks.
The planned debt issue comes after new data showed Australia & New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp -- the so called big four -- are growing their dominance.
Those banks now hold more than 80 per cent of the home loans market and a new high of 72 per cent of all lending to non financial corporates, according to Tripe T Consulting’s analysis of the most recent data from the prudential regulator.
“The Big 4 pillar banks continue to tighten their stranglehold on this market,” says Sean Keane of Triple T.
That’s why Suncorp’s debt offer is important. It shows the smaller banks can still access the public funding market at a competitive price, which should allow them to compete in the home loans market in particular.
Brisbane based Suncorp is offering investors five-year covered bonds with price guidance of 100 basis points over the underlying swap rate, according to the term sheet seen by Deal Journal Australia.
Covered bonds are seen as a cheaper source of funding for banks because the costs of offshore funding have become higher since the global financial crisis. These type of bonds allow banks to borrow money against a pool of assets on the balance sheet such as mortgages, as security for the loan, allowing the bank to pay a lower interest rate.
Pricing on the offer is expected later today. Lead arrangers on the deal are ANZ Bank, Citigroup, Deutsche Bank and Macquarie Bank.