Spanish Banks Return to Bonds
September 9th, 2010
Spanish banks that were squeezed out of wholesale finance markets in May have returned in force with a series of bond issues since late July and raised more than $4bn in the first five days of September alone, according to company announcements and figures from Dealogic, the data provider.
But both bank executives and analysts say that recent issuance has been confined to the big five listed commercial banks and to La Caixa, the big savings bank who has its home in Barcelona, and that the interest rate spread paid by even strong Spanish financial institutions remains relatively high.
Shunned by investors during the eurozone sovereign debt crisis, Spanish financial institutions issued no covered bonds – a previously popular form of financing secured on mortgage portfolios – in either May or June. Total debt issuance by Spanish banks fell to a negligible $2.3bn in May and $3.8bn in June, Dealogic said.
But since July the Spanish banks and savings banks have again been able to sell covered bonds to international investors. Total debt issuance reached $15.8bn in July, fell back to $1.7bn in the normally quiet holiday month of August, and accelerated again to top $4.1bn so far this month, including $2.5bn of covered bonds.
To add to the total, Santander, the biggest bank by market capitalisation in the eurozone, said it sold on Monday €1bn ($1.3bn) of three-year unsecured bonds at 145 basis points over the benchmark swap rate, amid brisk international demand
Other deals this month include €1bn of three-year covered bonds issued by La Caixa and another €1bn in two-year, mortgage-backed securities – double the initial plan – by Banco Sabadell.
Spanish bankers say they are relieved that wholesale finance markets – previously closed to all but the strongest banks such as Santander, and even then at prohibitively high rates of interest – are once again open.
“It’s a start,” said Iñigo Vega, a banks analyst at Iberian Equities in Madrid. “They are in the market again, which is a good sign. But it’s only six groups, which leaves 50 per cent of the system still out of the market.”
Big Spanish lenders such as Santander, BBVA and La Caixa are not only hogging the debt markets. They are also competing vigorously for domestic retail banking deposits by offering rates of interest to savers that their weaker rivals cannot afford.
In addition to raising medium-term debt, Spanish banks have also found it easier in recent weeks to access short-term liquidity, for example through “repo” transactions using Spanish government debt as security.
In this market too, however, the strongest banks are dominant, leaving weaker cajas, the unlisted savings banks, heavily dependent on the emergency liquidity provided by the European Central Bank.
Story from Financial Times
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