January 16, 2018

2017 Year in Review: Corporate Finance

2017 was marked by a return to stability following the volatility of recent times and the rise of innovative new products, especially in the green and social sectors.

“I’m really proud of NAB’s Shared Value approach to help customers, community partners and governments, and am keen to see this evolve over the year ahead”
Steve Lambert, NAB Executive General Manager Corporate Finance

A look back over the year

For the past five years Australian capital markets have been characterised by themes of volatility but also innovation. Volatility has seen markets close at various times due to many factors, often global in nature. Innovation has been driven by issuers seeking to deal with this volatility and also by changing investor preferences.

The last year mixed this up. Since the resolution of the Brexit vote, apart from a two-week period around the United States presidential election, markets have been open and quite stable. Capital
markets have taken a range of geopolitical issues in their stride, from the Middle East, South China Sea, Russia and North Korea, as well as concerns over Australian Sovereign ratings. It will be interesting to see how long this will continue.

Key themes

There are three key themes we are seeing in the Australian domestic market. First, the continued rise in the importance of Asian investors. And secondly, the growth of self-managed superannuation funds
in conjunction with the growth of non-institutional investors in the domestic bond market. Both of these also impact on our third theme, increased innovation.

We’re seeing increased capital flows both into and out of Australia across debt, equity and private markets. As part of the global hunt for assets, we’re seeing more Asian investors and banks setting up
shop here as well as greater interest for Australian money to move overseas, whether that’s investing in infrastructure or other opportunities, and we’ve been supporting that interest.

The other big theme is the power of self-managed superannuation and the growth of non- institutional investors in the domestic bond market. Traditionally, we saw this demand in the hybrid and convertible market but increasingly these investors are providing liquidity in senior debt of all types. 2016 was the year when this went from a consistent, albeit small, bid for new issues, into being a more significant part of most book builds.

A number of infrastructure related issuers saw strong bids in 10 year FRNs from this sector and I think this will be a continuing theme as more self-managed superannuation funds increase their
exposure to fixed income, a seriously underweight asset class.

The banking industry is facing constant disruption, and we’re seeing disruption across all parts of our business. As a result, NAB continues to challenge the market with new and innovative products. This was the year that broader green and social investing gained a lot more attention in the markets and enjoyed growing appetite from investors looking for new options to invest with impact. NAB met this demand with more than A$2.2 billion in green or social bonds issued or arranged during the year.

Earlier this year, NAB printed the first offshore green bond from an Australian issuer. Another first followed quickly with the world’s first Gender Equality Social Bond by NAB. The deals reflect this growing investor appetite for assets that are socially responsible. The market will continue to grow as investors have the desire for investments that are attractive in their own right and equally have purpose.

For full details, please see the attached document: