Analysts expect other foreign banks to follow Societe Generale in issuing a new hybrid security in the United States in coming weeks.
Societe Generale, based in Paris, plans to come to market with $800 million of these securities, which are similar to the real estate investment trust-preferred stock introduced last fall by Goldman Sachs & Co.
National Bank of Canada is expected to issue $150 million of similar securities into the U.S. capital markets, and other major French banks reportedly are considering the structure.
Traders said they expect any issue of the securities to jolt the Yankee bond market, which has been sluggish.
The new security was designed to enable banks to raise regulatory capital cheaply.
REIT-preferreds were first issued by Chase Manhattan Corp., Chevy Chase Bank, and CalFed Bancorp, which has since been acquired by First Nationwide Bank.
The REIT-preferred issues paved the way for the immensely popular trust- preferred securities that flooded the U.S bank debt market late last year and early this year.
In Societe Generale's version of the security, the bank issues securities to investors and uses the proceeds to buy assets, such as mortgage-backed securities or real estate assets. These assets are taken off the balance sheet and put into the trust.
"It gives the bank an injection of capital without diluting shareholder investment or adding to the bank's funding costs," said Ricardo J. Kleinbaum, a Yankee bank bond analyst with PaineWebber Inc.
"International banks usually get better pricing in their home market, but it is easier for them to come here with a special form or structure," said bank bond analyst Katharine Rossow of Chase Securities Inc. "Trust- preferreds are well ingrained in the capital markets but in Europe these structures may not be as accepted."
Yankee bank bonds have been weak due to an uncertain European economy and the volatility in Asian banks as a result of the devaluation in the Thailand's currency.
In spite of the attractiveness of the security, some analysts do not expect them to be as popular as trust-preferreds.
"I don't think there will be a flood," said Ms. Rossow. "Most European banks are well-capitalized."