Raiffeisen Bonds: experience?

Anyone bought bonds from them?
https://www.raiffeisen.ch/lugano/de/privatkunden/anlegen/downloads/nachrangige-additional-tier-1-anleihen.html

I wonder why they emit bonds and at that price.

These are not regular bonds. It is “almost-equity” (quasi-fonds-propres). More risk = more rewards

It’s a perpetual bond: normally, you never get the principal back.
If the rate stays at 2.25% (see the reset rules) you have a payback after 44.44 years.

I thought I’ve read you can get your money back.

In which place (in the prospectus) did you find this?

Not quite. This are fairly complex products and you should read the prospect carefully.

These generally have an interest that is a combination of the 5 years forward rate plus a risk premium. Meaning that the interest will be reset every 5 years. With higher inflation; we get higher interest.

However: the bond can only be called by Raiffeisen. So Raiffeisen will in 5 years decide if the current conditions (aka 5 years rate plus X) was attractive for them or not. So far, all bancs paid these back as the came down with the cheap money we have these years. But in case they in 5 years realise the risk premium (the X) that the market requested was higher now; you sit on a perpetual bond.

Its never good when one part had materially longer sticks than the other; so buy these with caution.

We now further need to talk about the AT1 side- this means that in case a certain capital Event happened like they dropped below a certain equity ratio; your principal could either be gone (Raiffeisen / ZKB) or you were automatically converted into Shares.

Conclusion: additional risk. These weregood investments until about 3, 4 years ago but so far; you are no longer compensated for the risk you take. There is simply to much liquidity in the markets

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I read it wrong. Raiffeisen has the right (with FINMA’s blessing) to stop it.

Also:

That sentence is uhm…weird.

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Whats wrong with that sentence? Swiss AT1 bonds are not subject to dividend taxation. These 2.25% are tax free. Thats lretty normal for these kind of bonds.

Just that we are clear what you are getting here:

This is:

  • 5 year Saron plus 2.25%; currently 2.25% next re-set in 5 years
  • Perpetual unless terminated by Raiffeisen (which given 2.25% was low may never happen)
  • Bond is void of Raiffeisen drops below 7% core capital
  • you don‘t pay any dividend tax; the entire 2.25% was yours

I’m not an expert on those things, also I keep readin Saron as Sauron… ahahah
Anyway that sentence in italian is weirder. The termination rules are fixed. It sounds like “i can’t believe it’s not butter”. They use the word “termination” but there in fact not a termination possiblity.

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Neither am I. So essentially I lend money to the bank, for an indefinite period of time, and under conditions that they unilaterally get to define? :thinking:

What does it say in italian?

but you still have to declare the payment and pay income taxes on it.

The coupon is splitted between an option premium and an interest payment.

image

The 1.52% is tax-free while the 0.73% should be reported for income taxes.

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