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BofA's Instinct Loans Aims to Transfer Leveraged Loans
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Bank of America Corporation (BAC - Free Report) , which launched an electronic syndicated loan trading platform – Instinct Loans – through Merrill Lynch this month, began trading in this platform since last week. Per a Bloomberg report, the bank sought to reallocate certain leveraged loans to electronic exchange through its new electronic loan trading platform.
BofA’s main purpose of launching Instinct Loans is to improve liquidity in the leveraged loan market by permitting clients to trade corporate loans twice a day electronically.
BofA, the biggest underwriter of U.S. leveraged loans, pressed fixed-income clients to move trades in the most liquid portion of the $800 billion market to an electronic exchange, according to the Bloomberg report.
The platform, which lets multiple participants bid on a particular number of loans during a session, began hosting two separate matching sessions from Thursday. The 30-minute trading sessions at 10 a.m. and 2 p.m. mainly targeted loans of $1 billion or more.
There are about 300 leveraged loans of that size denominated in U.S. dollars, according to data compiled by Bloomberg.
Moreover, 104 loans were traded during Thursday’s sessions and 113 on Friday with BofA planning to boost that number in coming weeks. While investors traded $75 million electronically on Thursday, $37 million were traded in follow-up trades. Overall, the bank accepted $176 million worth of bids and offers from investors on 80 loans.
At the launch of Instinct Loans, Brian Callahan, head of Electronic Initiatives and U.S. Par Loan Trading for Global Credit and Special Situations at Bank of America Merrill Lynch, said, “Providing liquidity and efficient execution are critical components of what we offer to our clients in the credit markets.”
“The introduction of Instinct Loans is another demonstration of our commitment to the loan market and to using technology to better serve our clients,” Callahan added.
Notably, clients selling loans via Instinct Loans also have the option of T+3 settlement for sale transactions to help address clients’ cash needs within the loan market.
With stringent regulations and higher capital requirements, big banks continue to face revenue challenges. Apart from resorting to several cost cutting measures, they are on a continuous look out for alternative sources of revenue. Further, the financial institutions continue to embrace new technology to attract and retain clients with hassle free services and an improved digital experience. Amid such a backdrop, BofA’s move does not come as a surprise.
Following a similar trend, other big banks like Wells Fargo & Company (WFC - Free Report) recently launched its own online small-business loan product – FastFlex. Also, JPMorgan Chase & Co. (JPM - Free Report) agreed to a strategic partnership with On Deck Capital to build its small-business unit, while The Goldman Sachs Group, Inc. (GS - Free Report) plans to commence online consumer lending later this year.
Currently, BofA holds a Zacks Rank #4 (Sell).
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BofA's Instinct Loans Aims to Transfer Leveraged Loans
Bank of America Corporation (BAC - Free Report) , which launched an electronic syndicated loan trading platform – Instinct Loans – through Merrill Lynch this month, began trading in this platform since last week. Per a Bloomberg report, the bank sought to reallocate certain leveraged loans to electronic exchange through its new electronic loan trading platform.
BofA’s main purpose of launching Instinct Loans is to improve liquidity in the leveraged loan market by permitting clients to trade corporate loans twice a day electronically.
BofA, the biggest underwriter of U.S. leveraged loans, pressed fixed-income clients to move trades in the most liquid portion of the $800 billion market to an electronic exchange, according to the Bloomberg report.
The platform, which lets multiple participants bid on a particular number of loans during a session, began hosting two separate matching sessions from Thursday. The 30-minute trading sessions at 10 a.m. and 2 p.m. mainly targeted loans of $1 billion or more.
There are about 300 leveraged loans of that size denominated in U.S. dollars, according to data compiled by Bloomberg.
Moreover, 104 loans were traded during Thursday’s sessions and 113 on Friday with BofA planning to boost that number in coming weeks. While investors traded $75 million electronically on Thursday, $37 million were traded in follow-up trades. Overall, the bank accepted $176 million worth of bids and offers from investors on 80 loans.
At the launch of Instinct Loans, Brian Callahan, head of Electronic Initiatives and U.S. Par Loan Trading for Global Credit and Special Situations at Bank of America Merrill Lynch, said, “Providing liquidity and efficient execution are critical components of what we offer to our clients in the credit markets.”
“The introduction of Instinct Loans is another demonstration of our commitment to the loan market and to using technology to better serve our clients,” Callahan added.
Notably, clients selling loans via Instinct Loans also have the option of T+3 settlement for sale transactions to help address clients’ cash needs within the loan market.
With stringent regulations and higher capital requirements, big banks continue to face revenue challenges. Apart from resorting to several cost cutting measures, they are on a continuous look out for alternative sources of revenue. Further, the financial institutions continue to embrace new technology to attract and retain clients with hassle free services and an improved digital experience. Amid such a backdrop, BofA’s move does not come as a surprise.
Following a similar trend, other big banks like Wells Fargo & Company (WFC - Free Report) recently launched its own online small-business loan product – FastFlex. Also, JPMorgan Chase & Co. (JPM - Free Report) agreed to a strategic partnership with On Deck Capital to build its small-business unit, while The Goldman Sachs Group, Inc. (GS - Free Report) plans to commence online consumer lending later this year.
Currently, BofA holds a Zacks Rank #4 (Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>