European banks are doing something they rarely do with their riskiest debt: thinking long-term. Banco Santander and NatWest Group are among the lenders selling record amounts of Additional Tier 1 bonds with 10-year call dates, a move designed to lock in relatively low borrowing costs for a full decade.
The strategy is straightforward. Issue perpetual hybrid bonds now while investor appetite is strong, push the first call option out to 10 years instead of the more typical five or six, and secure a longer runway of predictable capital costs.
What’s actually happening in the AT1 market
Banco Santander, meanwhile, has been even busier. The Spanish bank conducted a 1.5 billion euro perpetual non-call six transaction that pulled in over 10 billion euros in orders. That’s a roughly 6.7x oversubscription.
Santander has also announced a tender offer for up to $850 million of an outstanding AT1 tranche, effectively swapping older, potentially more expensive capital for fresh issuances at better terms.
