NBG to issue new Tier II bond
National Bank is making a new market foray on Tuesday, after its upgrade by Moody’s and recovery of investment grade.
NBG will issue a Tier II bond to raise 400-500 million euros. This is the first Tier II issuance since 2019, but also the first market foray in 2023 by National Bank, taking advantage of the positive climate that is emerging for the Greek economy and the banking system after the barrage of upgrades this month by Fitch and Moody’s for Greek banks.
Based on Moody’s methodology, National and Eurobank regained investment grade for their deposits, namely Baa3 from Ba2 before, a rating that is above that of the Greek state, which is ranked by the same house as Ba1. NBG debt issues are rated Ba1 (from Ba2) – i.e. in the same category as the Greek state, based on Moody’s.
The upgrading of the Greek economy and Greek banks has led to a de-escalation of spreads in recent weeks; notably the corresponding Tier II issued by the National Bank in 2019 with an interest rate of 8.25% is currently priced at close to 5.29% from 5.60% two weeks ago and 7% last July.
Accordingly, the Tier II bond that Eurobank had issued at end-2022, replacing the €950 million bond the bank had issued in 2018 and that had been covered by the state with an interest rate of 6.4%, is priced today close to 7.80%, from 8% two weeks ago and about 8.5% last July.
The bid book for the bond is expected to open on Tuesday. The bond will have a term of 10.25 years, callable after 5.25 years, and is expected to be rated Ba3 by Moody’s. The issue serves to cover the minimum requirements for equity and eligible liabilities, known as MREL, that banks have.
The target for NBG in 2025 is 27.06%, while the bank has already exceeded the intermediate target for 2023. The new issue will set the MREL at 23.57%, further narrowing the gap to the end-2025 target deadline.
