(Nov 12): HSBC Holdings Plc is working on two significant risk transfer deals to hedge around US$7 billion (RM28.6 billion) of large corporate loans in the US and Asia.

The London-based lender is looking to take advantage of investor appetite for the loss-absorbing instruments with a transaction tied to about US$3 billion of US loans, according to people familiar with the matter.

It is also discussing a deal linked to about A$5.8 billion of lending in the Asia-Pacific region, the people said, asking not to be identified because the information is private.

SRTs typically insure a first loss or junior tranche of a loan book, generally equivalent to between 5% and 15% of the portfolio value. Issuance has boomed in recent years, enabling mainly European and North American lenders to offload risk tied to US$1 trillion in loans and to release regulatory capital for new lending, shareholder payouts or acquisitions.

Banks are selling SRTs at a record pace this year despite recent signs that investors are demanding better terms in the face of robust supply and wider credit market volatility. Sales are on track to reach about US$45 billion, with deals hedging AI-related assets seeing particularly strong growth, according to Crescent Capital Group LP, which invests in the securities.

HSBC has overhauled its business following the appointment of CEO Georges Elhedery in September 2024, shuttering, selling or merging several business lines and cutting thousands of jobs as it looks to refocus on its core Asian markets. It is also becoming more reliant on Hong Kong after announcing a US$14 billion takeover of partly-owned Hang Seng Bank Ltd last year.

A representative for HSBC declined to comment.

Other banks are adding to the SRT pipeline. Spain’s BBVA SA is finalising a deal tied to about €4 billion of loans to mid-size corporates from its Vela SRT programme, according to people familiar with the matter. It is pricing at about 725 basis points over a borrowing benchmark, the people said, asking not to be identified because the deal is private.

ING Groep NV is also on track to complete a transaction tied to €4 billion of loans to small and mid-size companies originated by its unit in Belgium, other people familiar with the matter said. The SRT will hedge a junior piece of the portfolio, equivalent to about 5% of its value.

Representatives for BBVA and Amsterdam-based ING declined to comment.

Uploaded by Magessan Varatharaja