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I am looking at some bank listed securities and note that NABHA is trading at a large discount to face value (less than $65). It has a small margin of BBSW +1.25%, which still makes it a reasonable return given the price. But I believe that this does not qualify as Tier 1 capital and will become less so as time goes by. It’s cheap money for the bank but is this likely to be redeemed for the reason of not qualifying in your opinion?
A: I would be very mindful of NABHA – the oldest (and first) listed income security.
There has been talk (over many years) of NAB potentially redeeming the securities – however, nothing has come of it – and as a result – the price has largely been a one way bet.
At $65, you are getting an effective running yield of approx. 5.5% – interesting, but I am not sure that compelling.
