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BofA Sells ESG Bonds as Other Big Banks Snub Debt Markets

(Bloomberg) —

Bank of America Corp., the biggest corporate issuer of bonds tied to environmental, social and governance financing in the US, returned to the ethical debt market for the first time this year as Wall Street giants dial back issuance amid skyrocketing borrowing costs.

The lender is sold $2 billion in sustainability bonds maturing in six years, according to a person with knowledge of the matter. The bonds, which can be used to fund both environmental and social projects, yields 1.82 percentage points above Treasuries, after initial discussions of around 2 percentage points, said the person, who asked not to be identified as the details are private.

The self-led offering is the first since the lender borrowed $2 billion in December 2021 to fund similar projects. The bank has so far issued about $13.9 billion under different ESG debt labels since it started tapping the market in 2013, making it the biggest issuer of the bonds among US corporate and financial issuers, data compiled by Bloomberg show.

The six biggest US banks have so far raised $10.5 billion since they reported earnings last month, far less than as much as $30 billion that Barclays Plc expected from the top banks weeks after earnings, and as much as $45 billion during the quarter. Barclays strategists led by Peter Troisi wrote in a note last month that JPMorgan Chase & Co., Goldman Sachs Group Inc, Bank of America and Citigroup Inc. are the most likely to sell notes soon after posting results. Morgan Stanley raised $6.5 billion mid last month, which was followed by a $2 billion deal from Goldman Sachs. 

JPMorgan analysts Kabir Caprihan and Nikita Dyatlov anticipate bank issuance will underwhelm this quarter. That’s partly because the borrowers have probably moved from being “programmatic to opportunistic,” which occurs if funding needs are very manageable and not imminent. 

“We still expect some issuance, but again, the pace should be measured,” the analysts wrote in a note dated Oct. 24. “We are not in the camp that banks are waiting for spreads to go 10 basis points to 15 basis points tighter before bringing huge multi-tranche deals.”

The banks that decide to bring deals are having to pay up to borrow as risk premiums widen. The average spread on a financial institution bond was at 1.7 percentage point as of Friday, 18 basis points wider than the spreads on the broader high-grade bond index, according to Bloomberg index data. 

Related: Wall Street Banks Seen Flooding Markets With Bonds Post Earnings

–With assistance from Andrea Niper and Venty Mulani.

© 2022 Bloomberg L.P.


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