The US banking industry recorded a sequential increase in the total value of its capital issuances in the third quarter, against a backdrop of proposed changes in regulatory capital requirements.

US banks raised a total of $17.32 billion in the third quarter, up from $16.31 billion in the second quarter, but down from $27.83 billion in the third quarter of 2022, according to S&P Global Market Intelligence data.

Only $34.8 million of the capital offerings were subordinated debt issuances — termed as lower-level Tier 2 capital — reflecting a 98.9% sequential decline and a 99.3% year-over-year decline.

Senior debt issuances rose 25% quarter over quarter to $16.25 billion and continued to account for the majority of the banking industry's total capital offerings. Preferred equity offerings totaled $174.3 million. There were no preferred equity offerings in the previous quarter.

Common equity raises totaled $854.1 million, a 719.7% jump from the second quarter, largely boosted by Banc of California Inc.'s $400 million private placement of its common shares in July. The issuance was a part of Banc of California's merger agreement with PacWest Bancorp.

Under the terms of the deal, Banc of California is issuing roughly $1 billion of stock to PacWest shareholders, backed by $400 million of equity financing from Warburg Pincus LLC and Centerbridge Partners LP to reposition the combined company's balance sheet.

Top public bank issuers

JPMorgan Chase & Co. was the largest issuer among US public banks in the third quarter, with two senior debt issuances worth $2.5 billion and $2 billion, both completed in July.

JPMorgan ended the third quarter with a common equity Tier 1 ratio of 14.3%, up about 50 basis points versus the prior quarter, in anticipation of the stricter requirements from the Basel III endgame proposal.

"[A]ssuming the Basel III endgame and [global systemically important bank] proposals are finalized in their current form, we would see a 45% increase in our capital requirements relative to that 2017 starting point," said JPMorgan CFO Jeremy Barnum in the company's third-quarter earnings call.

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Other big banks also revealed in third-quarter earnings calls the potential impact of the evolving regulatory environment on their capital levels and highlighted future plans depending on how the final capital rules play out.

"Looking forward, we expect to continue to have capacity to increase our [common equity Tier 1] ratio, while we plan to continue to repurchase shares as we wait for the capital rules to be finalized," Michael Santomassimo, CFO of Wells Fargo & Co., said during the company's earnings call.

Wells Fargo's $172.5 million offering in July contributed to the bulk of third-quarter preferred equity offerings.