Greece’s national bank moves to get back into bond markets

Bank plans first bond sale by a Greek bank since financial system crippled in 2014

National Bank of Greece is planning the first bond sale by a Greek bank since 2014, before an impasse with international lenders crippled the nation's financial system.

The country's oldest bank hired Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, HSBC Holdings, NatWest Markets and UBS for a benchmark-sized issue of three-year covered bonds in euro, according to Apostolos Mantzaris, an official at the Greek bank's capital markets division. It will host meetings with institutional investors across Europe starting Wednesday.

Regaining access to bond markets is a key step for Greek banks as they curb dependence on the central bank's Emergency Liquidity Assistance. The programme has kept the financial system afloat since 2015, when the newly elected government clashed with creditors, including the International Monetary Fund, over the terms of its bailout.

The same year, Greek banks wrote down about €3.4 billion of their unsecured notes.


Soured loans

The banks remain saddled with soured loans, and regulators may need to stress-test them earlier in 2018 than originally planned, ECB president Mario Draghi said last week.

Non-performing loans of close to €100 billion remain on the banks’ books. The Bank of Greece aims to reduce this figure to €83 billion by the end of this year, and €67 billion by the end of 2019.

"It's probably not the best timing, with the IMF review not yet finished, but maybe they are preparing to issue once that is done," said Otto Dichtl, a fixed-income analyst at brokerage Stifel Nicolaus Europe.

National Bank follows the Greek government's return to bond markets after three years, when it raised €3 billion on July 25th. So far, government-backed agencies such as the European Investment Bank have been the only buyers of Greek-covered debt, including bonds being sold by Piraeus Bank.

It is deemed the safest type of bank debt as it has a guarantee from the issuer and is backed by a pool of assets such as mortgages. Covered bonds are also excluded from European bail-in rules.

– (Bloomberg)