APRA’s recently announced rules on the risk weightings for the big four banks and Macquarie have triggered Westpac’s issue of a new hybrid which will go towards increasing the banks tier 1 capital. The new hybrid (ASX code: WBCPF), will be issued at a margin to BBSW of between 400bps and 420bp, set in a book build process. The obvious question is, “what margin is enough?”
Below is a rather busy diagram of many of the new issues of the major banks and a few regionals since 2009. It shows the margin at which the hybrids were initially issued as well as the year of issue. Then the current trading margin has been added to show how each particular security has fared since then.
To make things a bit clearer, the regional banks were dropped from the diagram and then it was split into four; one for each of the majors.