Capital: More U.S. Banks Finding a Welcome In the European Capital

Large U.S. banks that have tapped the Eurobond market could soon find themselves in a more crowded marketplace, but it could be good news.

Eager European investors continue to present good funding opportunities for large money-center banks. The bigger banks have used their international recognition to diversify their funding.

Now analysts are predicting that these banks may soon be joined by some newly merged bank entities.

"As U.S. banks consolidate and grow bigger, they want to establish a more global presence, at least on the funding side," said John Works, a fixed-income analyst at J.P Morgan & Co.

Analysts said first-time issuance into the Eurobond market by U.S. banks would be a positive development, even for those large banks that already issue into the European market.

"It would create a deeper market with a larger number of names," said Mr. Works. "It would show increased acceptance of U.S. banks."

The banks that have issued debt in the Eurobond market have generally found a receptive investor audience. Indeed, liquidity is generally perceived to be greater in the Eurobond market than in the U.S. market.

BankAmerica Corp., one of the more active players, raised more than $150 million last week in the latest phase of its Eurobond program.

BankAmerica's most recent floating-rate issues, $50 million of notes, came to market last Wednesday. The issues were underwritten by UBS Inc. and were priced at the three-month London interbank offered rate plus 10 basis points.

On Friday, the California-based bank issued $108 million of seven-year fixed-rate notes denominated in yen, which were underwritten solely by Nikko Europe PLC. The notes carried a 3% coupon.

Analysts said that interest in the European market has ramifications for the U.S. debt markets as well.

Since some of the money-center banks have issued more actively in the European than in the U.S. market, bank debt in the American market could achieve a greater scarcity value.

"It helps our market because there is a limited supply of American bank paper," said Ethan M. Heisler, a fixed-income analyst at Salomon Brothers Inc.

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