JPMorgan sells $17.3b of bonds in largest bank deal
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A Chase Bank branch in Manhattan, New York City. JPMorgan Chase, which also does business as Chase Bank, has raised US$22 billion in the US dollar investment-grade bond market this year, more than any other major American bank, according to data compiled by Bloomberg.
PHOTO: AGENCE FRANCE-PRESSE
NEW YORK • JPMorgan Chase & Co sold US$13 billion (S$17.33 billion) of bonds on Thursday, the largest deal by a bank, taking advantage of some of the lowest borrowing costs in years to boost its capital after the Federal Reserve let pandemic relief measures lapse.
The deal, which followed the bank's best quarter, hit the market as corporate borrowers continue to see heavy demand for debt that provides a decent premium over Treasuries.
Order books grew to about US$26 billion, allowing JPMorgan to trim the interest on the debt from the relatively high spreads it initially offered, according to a person with knowledge of the matter.
The jumbo offering may have been related to recent changes in regulatory relief for banks, according to Bloomberg Intelligence analyst Arnold Kakuda.
Treasuries liquidity disappeared in March last year. In response, the Federal Reserve told banks they did not have to factor in Treasuries or deposits when calculating the supplementary leverage ratio (SLR), which tells them how much capital to set aside to back up their holdings. That exemption lapsed two weeks ago.
Banks were left in the position of needing to sell Treasuries or add capital, and JPMorgan's sale of unsecured debt will help it meet total loss-absorbing capacity requirements, and put the ratio back in balance, Mr Kakuda said.
JPMorgan signalled on Wednesday that it would do something. "We have levers to manage SLR and we will," chief financial officer Jennifer Piepszak told analysts on a quarterly earnings call.
Including the latest sale, JPMorgan has raised US$22 billion in the US dollar investment-grade bond market this year, more than any other major US bank, according to data compiled by Bloomberg.
"Banks are always going to be hefty issuers, which lends a certain opportunism to tapping the markets especially when funding is still so cheap," said senior analyst Jesse Rosenthal at CreditSights.
The longest portion of the five-part offering, a 31-year security, will yield 107 basis points above Treasuries, according to the person, who asked not to be identified discussing a private transaction.
The previous largest bond sale by a bank also came from JPMorgan, a US$10 billion offering in April last year, the Bloomberg-compiled data shows.
BLOOMBERG
