(Globe & Mail Streetwise) Smart CFOs know it is best to raise capital when the markets are open, rather than waiting for the day when the company really needs cash.
Right now, it’s RRSP season. Despite the mayhem in equity markets, or perhaps because of the stock market’s slide, there’s plenty of investor interest in safe securities that throw off income. So the banks are issuing preferred shares, reinforcing their capital bases because they can, not because they need to.
Toronto-Dominion Bank tapped the market Tuesday for a $150-million in a preferred share offering. Underwriters led by TD Securities have the option of increasing the size of this deal to $200-million, and likely will. The shares sold for $25 each and promise a 5.6 per cent yield.
Scotiabank did a $200-million preferred share offering last week, also with a 5.6 per cent dividend. And National Bank raised $400-million with an issue called NBC Asset Trust, a form of asset-backed tier one capital that offered a 7.24 per cent yield.
CIBC, of course, hit the market with $2.9-billion in common stock last week to help weather the storms besetting U.S. credit markets. Assuming CIBC can sustain its dividend, this common stock now sports a 5.3 per cent yield. Royal Bank common shares, in contrast, yield 4.1 per cent. Royal Bank, Bank of Montreal and Scotiabank are also all accessing the European covered bond market for the first time, a move meant to diversify the banks sources of funding.