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“There will be an avalanche of additional tier one cocos next year from European banks as banks build capital buffers and improve their leverage ratios", said Gerald Podobnik, head of capital solutions at Deutsche Bank.
European banks have issued a record $9.6 billion worth of cocos from 10 deals so far this year, compared with $9 billion for five deals during all of 2012 according to Dealogic, the data provider. Mr Podobnik said he expected about €30 billion of tier one coco issuance in 2014.
Sandeep Agarwal, head of European debt capital markets at Credit Suisse, said regulatory changes under the EU’s CRD IV proposal next year will cement cocos’ status as a capital buffer. “There will be a significant step jump in issuance next year", he said. “Regulatory clarity means banks will embark on building up their tier one and tier two capital bases [and] we estimate about $75-$100 billion in issuance for 2014.”
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