Banks prepare to issue bonds of their own

Greek banks are preparing their own bond issues following the country’s successful return to the markets after three years.

Local lenders are planning to issue bonds right after the summer in a bid to strengthen their cash flow and make their own return to international markets. A similar move took place in 2014 after the sovereign bonds issued then, and it should be noted that banks secured a better yield then than that of the Greek state in their first return to the markets since 2009.

Now banks are planning to come back to the bond markets for a second time, aiming to draw more than 1 billion euros. They are also preparing to issue covered bonds – i.e. bonds covered by loan portfolios. These issues are intended to help local banks to draw liquidity that would reduce their dependence on emergency liquidity assistance (ELA) from the Eurosystem. At the end of June banks’ dependence on ELA fell to 37.9 billion euros, from 65.1 billion at end-2016.

Of course everything depends on the general course of the economy and the consolidation of the positive atmosphere. Bank officials stress that the sovereign bond issue has to be combined with more structural reforms and privatizations.