Bank hybrids: A reality check

The risks and price moves of bank hybrids have received considerable attention. We take a look at some common claims.

Summary: Considerable press has recently been given to the suitability, risks and price movements of bank hybrids, but this is worth putting into context. Although capital notes contain trigger conditions, potential capital losses would only be a factor in extreme circumstances. Recent price falls can be explained by market indigestion and rotation into cheaper equities after the sell-off. And shares have a higher dividend now, but this is not always the case.

Key take-out: Investors who understand the importance of a diversified portfolio should not be fazed by recent press around hybrids.

Key beneficiaries: General investors. Category: Hybrid securities.


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