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HSBC Redeems $1.265 Bn Of Preferred Securities
May 17, 2016 9:23 AM ET
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About: HSBC Holdings PLC (HSBC)
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Summary
3 callable preferred stocks were redeemed by issuer HSBC USA.
This is the latest in a flurry of redemptions by banks headquartered in Europe.
Which Preferred Stocks could be called next and how investors can benefit.
Yesterday HSBC Holdings (HSBC) USA announced the redemption of $1.265bn of preferred securities. I would usually say this was a 'surprise' announcement as some of the issues called, particularly HUSI-F, were trading below par. But as I said in my article about last week's UBS redemption, there is a distinct trend of this activity in Europe based banks.
The full announcement can be found on Yahoo Finance here, but to summarize, the following securities were called -
- 20,700,000 shares of Floating Rate Non-Cumulative Preferred Stock, Series F (ticker symbol: HUSI-PR F);
- 373,750 shares of Floating Rate Non-Cumulative Preferred Stock, Series G and 14,950,000 Depositary Shares, each representing one-fortieth of a share of Floating Rate Non-Cumulative Preferred Stock, Series G (ticker symbol: HUSI-PR G); and
HUSI-F was only costing HSBC 3.5% as the yield was based on 3 month LIBOR + 0.75% or 3.5%, whichever was higher. Obviously they won't be able to issue anything with a lower yield, so the redemption must have been forced upon them. In fact Yahoo reports,
- 373,750 shares of 6.50% Non-Cumulative Preferred Stock, Series H and 14,950,000 Depositary Shares, each representing one-fortieth of a share of 6.50% Non-Cumulative Preferred Stock, Series H (ticker symbol: HUSI-PR H).
'The redemptions announced today were approved by the Federal Reserve Board as part of HSBC North America's planned capital actions pursuant to the 2015 Comprehensive Capital Analysis and Review (CCAR), and reflect the strategy of HSBC North America Holding Inc. and HSBC USA of continuing to optimize their capital structures according to U.S. Basel III'
This I find very interesting as if these regulations are forcing redemptions, why is nobody predicting this? HUSI-F traded at $22.5 at yesterday's open, so anyone in the know made an easy 10%. And as I reported last week, UBS-D holders made a whopping 52% gain on redemption.
Also, these regulations are costing banks money. Where did HSBC find $1.265bn to call these stocks? Looking at the share price performance of European banks, it looks like something is wrong. This isn't the time to be make costly regulations.
How does a HSBC stock holder or bond holder feel, seeing HUSI-F being redeemed. Will one of them say "thanks for improving the capital structure" by redeeming this 3.5% stock.
Other redemptions
Other stocks to be redeemed lately include - BCS-C, RBS-E, RBS-I, RBS-G
What stocks could be next?
AEG preferreds, ING preferreds, DB preferreds, PUK preferreds, SAN preferreds, etc. ... Every one's job has to be to dig deeper into the redemptions and to find the next one trading bellow call price.
Conclusion. Too many redemptions from European banks have to mean something. Is there another storm coming? Would you redeem UBS-D or HUSI-F if you weren't forced to do it?
Sono state richiamate le preferred emesse dalla filiale HSBC USA Inc. perché dal 2016 non contribuiscono più al T 1 Capital ( U.S. Basel III final rule banche con attivi < $ 15 miliardi ) Le preferred emesse dalla casa madre invece entrano nel grandfathering e contribuiscono in funzione del plafond al CET1. Per questo HSBC ha richiamato HUSI-F T.V. 3m. libor + 0.75% HUSI-G T.V. 3m. libor + 0.75% HUSI- H T.F.6,5% anziché le più costose HSEB 8.00% HSEA 8,125%
