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By Steve Slater
LONDON, May 3 (IFR) - HSBC said it expects to be "prettybusy" every quarter for the next three years as it faces havingto issue up to US$70bn of debt to meet new capital adequacyregulations.
HSBC sold US$10.5bn-equivalent of senior bonds inlate-February and through March, and said more big deals areinevitable.
It has to replace US$51bn of debt that is due to mature bythe end of 2018, and needs to issue more debt to meet new globaltotal loss-absorbing capacity rules, or TLAC. The aim of therules is to make bondholders suffer losses before taxpayers if abank hits trouble, to address the problem of banks being 'toobig to fail'.
"On top of that (maturing debt) we have somewhere in therange of US$10 billion to US$30 billion to do to meet theoverall TLAC requirement as we presently understand it and inconversation with our regulators," said Iain Mackay, HSBCfinance director.
"We'll be pretty busy every quarter from now through to theend of 2018 in terms of making sure we make that regulatoryrequirement from a TLAC perspective," he told reporters onTuesday.
Mackay said HSBC's issuance will certainly include seniorsecurities, and possibly Tier 2 bonds or Additional Tier 1hybrid bonds, and would be spread through the period.
"We're going to go fairly even. When conditions areconducive, where the spreads are nice and tight, we'll probablydo more provided the market has appetite for it," he said. Henoted other big international banks also had a lot ofrefinancing to do before TLAC rules come in.
HSBC has traditionally not been a massive issuer of debtbecause it gets ample funding from Asian retail depositors. Thatunderpins its credit ratings, and its bumper issuance inFebruary and March was three times oversubscribed by investors.
All the debt was issued through its group holding company.The bank will distribute the funding to its various subsidiariesin forms compliant with local regulations.
Mackay was speaking after the bank reported a 14% drop infirst-quarter pre-tax profits from a year ago. Its core capitalposition at 11.9% was unchanged from the end of 2015 but thatfell short of analysts' forecast for a small rise and calledinto question whether the bank can sustain its progressivedividend policy.
CEO Stuart Gulliver said the capital ratio will get a 60bpboost when the sale of its Brazilian business concludes shortlyand the capital position was strong, even while paying adividend.
HSBC's global banking and markets business reported apre-tax profit of US$2.12bn, down 30% from a year ago.
GBM's revenues fell 12% to US$4.32bn, which analysts saidrepresented a more resilient performance than most major US andEuropean investment banks.
Its markets revenues fell 19% from a year ago, including a37% drop in credit (to US$159m); a 34% fall in equities(US$303m); and 15% fall in foreign exchange (US$757m). Ratesrevenues rose 21% to US$546m.
Its capital financing revenues were flat from a year ago atUS$875m.
Gulliver said markets income was hurt by extreme volatilityin January and February, which was made worse by a reduction inmarket liquidity as banks have reacted to tougher global capitalrequirements. Conditions had improved in March and April, thebank said.
HSBC's group profits of US$6.11bn were down from US$7.06bn ayear ago but above analysts' forecasts, thanks to decent costcontrol. Its shares dipped 1.6% in morning trading,outperforming a 3% fall across the European banking index. (Reporting by Steve Slater)
