All four core lenders have now issued bonds

By Evgenia Tzortzi

Eurobank’s 500-million-euro four-year bond issued on Thursday was more than twice oversubscribed as orders totaled 1.1 billion euros at an interest rate of 4.25 percent. This completes the set of all four Greek systemic banks to have successfully issued bonds as the Greek economy reverts to normality.

Eurobank sources said the issue confirmed the international investment community’s interest in the lender, as was also the case during its successful recent 2.9-billion-euro share capital increase. There was significant activity on the part of long-term investment funds, which illustrates the return of all categories of investors to the Greek market.

The decision to opt for a four-year bond was the outcome of contacts with international investment firms during Eurobank’s recent roadshow, when the market had expressed a need for the creation of a reliable range of interest rates for Greek banks to serve as a yardstick for the pricing of future issues by banks and other Greek enterprises. In the last few months banks Piraeus and Alpha have issued three-year bonds, while National went for a five-year paper, meaning that Eurobank completes the range of available yields.

In drawing medium-term liquidity, Eurobank is further bolstering its cash reserves so that it can smoothly cover the expected requirements for the funding of the Greek economy. This follows recent decisions by the European Central Bank aimed at strengthening liquidity and assisting growth on a continental level.

Eurobank’s chief executive Christos Megalou expressed confidence that the Greek economy is very close to returning to growth during a speech in Cyprus earlier this week. The gradual recovery, Megalou said, will likely begin in the upcoming quarters, while the fiscal stabilization and a return to economic growth are creating a field of significant opportunities for the banking system that Eurobank will be able to capitalize on. He also estimated that 2015 will be the first year that Greece records positive credit expansion after a very long time.

Megalou’s Cyprus visit preceded Nicosia’s first attempt to tap the markets after its international bailout with the issue of a 750-million-euro five-year bond at an interest rate of 4.75 percent. During his meetings with the Cypriot finance minister and the country’s central bank governor, Megalou expressed Eurobank’s intention to utilize all opportunities arising in Cyprus for new partnerships, as the island nation’s economy will stabilize and gradually revert to a growth mode.

According to the chief executive of Eurobank Cyprus, Michalis Louis, the Greek-owned lender will continue to support the Cypriot economy as the group “believes in the abilities of the country and will do everything possible to support its effort to return to economic expansion.” Eurobank’s Cypriot subsidiary achieved satisfactory results in 2013 as its net earnings after provisions and taxes came to 35 million euros while maintaining a particularly strong capital adequacy ratio at 45 percent at end-2013.