14 Sep – 18 Sep 2015

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A picture tells a thousand words. Why are the Bendigo hybrids (ASX code BENPE) so out of line with other comparable bank hybrids? The usual explanation would be something is wrong at Bendigo and the securities deserve some sort of penalty pricing. However, if this were the case, then why are the other securities of Bendigo not being similarly penalised? Both of these securities are Basel 3 style hybrids, just as the BENPEs are.

Evans and Partners believe the gap to be the result of what is called “mispricing”; the market has simply allowed an aberration which will typically disappear as investors pick up on it. The second chart shows the Bendigo hybrids’ margins over time. The margins of Bendigo’s convertible preference shares 2 (ASX code BENPE) and convertible preference shares 3 (ASX code BENPF) have jumped 1% in the past 4 weeks.

Hybrids20150918(1)Hybrids20150918(2)

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ASX-LISTED HYBRIDS

COMPANYCODEHYBRID
TYPE
MATURITY
OR STEP-UP
DATE
MARGIN
INC FRANK
TRADING
MARGIN
∆ WEEKWEEK
CLOSE
YTM
Est**
ANZ Banking GroupANZPAMCPS I16/12/20163.10%3.05%-0.98%99.985.23%
ANZ Banking GroupANZPCMCPS II28/09/20173.10%3.71%-0.91%99.005.97%
ANZ Banking GroupANZPDMCPS II1/09/20213.40%4.77%-0.16%93.627.03%
ANZ Banking GroupANZPECapital Note24/03/20223.25%4.87%0.11%94.357.13%
Bendigo BankBENHBPerpetual21/10/20541.00%2.66%0.11%74.004.84%
Bendigo BankBENPDMCPS II13/12/20175.00%4.13%-0.71%103.516.39%
Bendigo BankBENPEMCPS II30/11/20203.20%5.07%0.20%93.557.33%
Bendigo BankBENPFMCPSII15/06/20214.00%5.08%0.19%96.507.34%
Bank Of QueenslandBOQPDMCPS II16/04/20185.10%4.69%-0.04%103.956.95%
CBA PERLS 3PCAPAStep Up6/04/20161.05%3.88%-0.44%198.006.06%
CBA PERLS 6CBAPCMCPS II15/12/20183.80%4.24%0.09%98.656.42%
CBA PERLS 7CBAPDMCPS II15/12/20222.80%4.58%-0.05%89.956.76%
ChallengerCGFPACapital Note25/05/20203.40%4.86%0.06%94.507.04%
EldersELDPAPerp'l Pref30/06/2051N/A0.00%0.00%74.700.00%
IAGIAGPCMCPS II1/05/20174.00%4.38%0.13%101.666.64%
IAG RESIANGReset pref16/12/20194.00%4.13%-0.07%101.006.31%
Macquarie BankMBLHBIncome SecPerpetual1.70%3.84%0.04%71.516.02%
MacquarieMBLPACapital Note24/03/20203.30%4.79%-0.40%95.907.05%
MacquarieMQGPACapital Note19/06/20184.00%4.51%0.15%99.556.77%
Multiplex SITESMXUPAPerp'l PrefPerpetual3.90%5.93%0.03%79.008.11%
Nat Aust BankNABHAIncome SecPerpetual1.25%3.25%-0.05%70.995.43%
Nat Aust BankNABPAMCPS II20/03/20193.20%4.33%-0.44%96.306.51%
Nat Aust BankNABPBMCPS II17/12/20203.25%4.84%0.12%93.007.02%
NufarmNFNGStep UpPerpetual3.90%5.61%0.04%83.437.87%
PaperlinxPXUPAPerp'l Pref30/06/2052N/A8.80%0.00%13.8011.06%
Ramsay Health CareRHCPAPerp'l PrefPerpetual4.85%4.84%0.03%102.927.10%
Suncorp-MetwaySBKHBIncome SecPerpetual0.75%2.16%-0.01%76.404.34%
SuncorpSUNPCMCPS II17/12/20174.65%4.17%-0.13%100.886.35%
SuncorpSUNPEMCPS II17/06/20203.40%5.07%0.23%93.277.25%
Seven Network TELYS 4SVWPAPerp'l Pref2/12/20544.75%8.81%0.24%68.0211.07%
WestpacWBCPCMCPS II31/03/20183.25%4.36%-0.19%99.896.62%
WestpacWBCPDMCPS II8/03/20193.20%4.41%-0.29%96.306.59%
WestpacWBCPEMCPS II23/09/20223.05%4.61%0.01%91.306.79%
WestpacWCTPAStep Up30/06/20161.00%3.33%-0.43%98.005.51%

** YTM for floating rate securities is an estimate using current interest rates. This will vary if rates change.
Source: Evans & Partners. Dealing Contact Michael Saba +61 3 9631 9813

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