(Bloomberg) -- State Street Corp. is offering a new series of preferred shares on Wednesday, just a day after its finance chief flagged a speed-up in the pace of its stock buybacks.
The Boston-based lender is looking to raise at least $500 million with a perpetual issue that comes at initial price talk of around 6.875%, according to a person familiar with the matter who asked not to be identified.
The prospective deal follows comments from Chief Financial Officer Eric Aboaf, who pointed to more share buybacks in coming quarters for which the bank will need to maintain an appropriate level of capital.
After buying back $200 million in shares in the second quarter, “we expect that pace to accelerate into the third quarter and then again into the fourth quarter,” Aboaf said in response to analyst questions during State Street’s second-quarter earnings call Tuesday. “With the right level of preferred equity, we could — we can operate where we need to,” he added.
Banks in the US sell preferred shares to raise so-called Additional Tier 1 capital, which is used to top up their ordinary stock capital. US firms are required to meet certain minimum capital thresholds to withstand potential market shocks.
Earlier this year, State Street issued new preferred stock while repaying a smaller amount of older securities, effectively boosting its buffers ahead of stock buybacks.
What Bloomberg Intelligence Says...
“The bank is slightly above its common equity target of 10-11% allowing room for more buybacks, while preferred issuance can offset lower common equity for its leverage ratio.”
—— Arnold Kakuda and Nick Beckwith, BI analysts
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