“We decided to pay the bonds issued in 2006 on maturity because we have comfortable liquidity in the Romanian currency. But we are thinking of issuing notes within the EUR600 million cap approved by the shareholders and we are considering launching an EMTN program, which would enable us to become a frequent issuer in order to diversify our sources of funding,” he said.
In the spring of this year, BRD shareholders approved the launch of bonds in lei or in euros in 2011-2012 within a cap equivalent to EUR600 million over a period of a maximum of ten years.
The leu-denominated bond issue in December 2006 was a success for BRD, with the bonds also being listed on the Luxembourg stock exchange. Carried out during the term of former president Patrick Gelin, the transaction took place before Romania joined the EU, and was dedicated to foreign investors. It was able to take advantage of a growing appetite at the time for investments in lei, being highly oversubscribed. The operation was led by SocGen Corporate & Investment Banking, alongside Bank Austria Creditanstalt and Raiffeisen Zentralbank. For this loan BRD pays almost RON57 million in overall interest.
After the 2006 issue, BRD did not continue to get its financing independently from the external market, with the BRD covering its financing needs directly by parent bank Societe-Generale. Now the local bank is preparing to return to the market and cover some of its euro financing needs on its own.
Cercel says financing from parent bank Societe Generale accounts for only 16-17% of the total and that reducing current lines of credit is out of the question, but that in the current context of the euro zone, funding resources from outside the group need to be diversified.
At the same time, BRD does not feel the need to pay more to attract deposits from clients.
“There is no pressure on us to increase deposit interest rates because our loan/deposit ratio is the most balanced one among large banks, around 110%. “Other rivals have imbalances of 130-140%, and parent banks pressure them to adjust them in order to replace some of their external financing. This leads to pressure being put on deposit interests, which are up to over 7% on leu deposits and up to over 4% on euro deposits, levels hard to justify in terms of efficiency.
Pressured to consolidate their own capital, parent banks are slowly leaving local subsidiaries to find their own sources of funding, putting an end to a period during which the expansion of euro lending relied on massive lines of credit from parent banks.
Austria’s Erste, significantly hurt by the crisis in 2009, and having to resort to government aid, was the first to send the BCR to the external market to get direct funding, and the bank launched a three-year EUR3 billion EMTN program, but failed to attract substantial amounts.
(English version by Daniela Stoican)