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National Bank of Greece eyes more bond issuance in 2018

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National Bank of Greece eyes more bond issuance in 2018

National Bank of Greece SA sees 2018 as "pivotal" for its own business and the wider Greek banking sector, as it predicts fundamental economic improvements will lift its asset quality, lending volumes and income, deputy CEO Paul Mylonas told an earnings call Nov. 22.

In turn, the bank is likely to issue more debt on the open markets after a long hiatus provoked by the financial crisis in Greece, the executive added.

"The recent €750 million covered bond transaction representing the first covered bond issuance by a Greek bank since 2009, as well as the first debt capital market issue by Greek banks since 2014, paves the way for a recurring presence in the international debt capital markets," said Mylonas, without specifying exact figures for future issuance.

The bank, which is one of the four systemic financial institutions in the country, issued a covered bond of €750 million on Oct. 10 at a coupon of 2.75% and a yield of 2.9%.

"Looking ahead at the big picture, 2018 will be a pivotal year for NBG and the Greek banks. First, the Greek economy should be performing significantly better as both monetary and fiscal conditions will be significantly less of a drag on economic activity and the level of uncertainty has subsided considerably. As a result corporate credit demand will pick up further, allowing NBG to take advantage of its superior liquidity position and lower cost of funding in order to support asset expansion," Mylonas said.

The Greek banking sector was beset by falling deposits, growing defaults and lack of investor confidence amid delays in the government's 2016 negotiations with the EU and the IMF over a €86 billion bailout package agreed in 2015. The talks for the so-called review ended in July with the payment of €8.5 billion toward the country's debts, spurring slightly higher economic growth.

GDP is set to increase by 1.7% in 2017 and 2.5% in 2018, according to the government, which is working toward closing the 2017 bailout review ahead of Christmas.

"Asset quality resolution will accelerate due to an improving economy and the implementation of a more aggressive strategy," Mylonas said. At the end of September, National Bank of Greece sat on €18.5 billion of domestic toxic loans, slightly less than the €18.7 billion recorded at the end of June and equivalent to 45.3% of its total Greek loan book.

The bank booked an aftertax loss of €35 million in the third quarter, bringing its total loss for the first nine months of 2017 to €178 million. It booked a €16 million profit in the third quarter of 2016 but recorded a loss of €2.96 billion for the first nine months of that year following massive write-downs in the second quarter.

Net interest income was €378 million in the third quarter, down from €417 million a year earlier, while net fees rose to €57 million from €51 million. Provisions amounted to €156 million, down slightly from €161 million in the year-ago period.

Its common equity Tier 1 ratio was 16.8% on a phased-in basis and 16.6% on a fully loaded basis, up from 16.5% and 16.3%, respectively, three months earlier. The bank noted that the ratios exclude the impact of the sales of its Greek insurance unit and banking units in Romania, Serbia and South Africa, which it said are expected to complete by early 2018 and give it an additional capital cushion ahead of stress tests planned for midyear.