Issue of Croatian Bank Bonds on International Capital Market Successful

Lauren Simmonds

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As Poslovni Dnevnik writes, these Croatian bank bonds were issued with an annual interest rate of 0.75 percent and a yield to maturity of 0.835 percent. With the realisation of this transaction, Erste Bank made an additional step forward and added its first international euro bond to its existing securities in circulation on the Croatian capital market. This made it the first bank in all of Croatia to successfully issue its own bonds on the international capital market.

The primary purpose of this Croatan bank bonds issue is to meet the regulatory requirement with which the bank must comply by the 1st of January 2024, and the first binding requirement in the transitional period must be met by the 1st of January 2022. This regards the so-called MREL requirement (Minimum regulatory capital requirement and eligible liabilities).

MREL is part of the European Union (EU) regulatory framework aimed at strengthening the financial system, with a focus on credit institutions, in order to increase resilience to shocks, unforeseen stress scenarios and prevent systemic risk. The funds raised by this Croatian bank bonds issue will be used for general financing purposes and to encourage green and sustainable investments, and will also contribute to the further diversification of funding sources.

The issue was intended for institutional investors in the international market, and in the final allocation the largest share was played by international financial institutions with a share of 39 percent, followed by investment funds with 32 percent, banks with 15 percent and pension funds and insurers with a 14 percent share. Over 70 institutional investors participated in the issue, with a very pronounced European geographical diversification (the UK and Ireland with 41 percent, Germany and Austria with 27 percent, CEE countries with 11 percent, France with 6 percent, and Switzerland, the Benelux countries and others with smaller percentages of shares).

The joint agents of the issue were BofA Securities Europe SA, Erste Group Bank AG, Landesbank Baden-Württemberg and Societe Generale.

“Erste Bank is the most active issuer of bonds among financial institutions in the Republic of Croatia, with this Croatian bank bonds issue being the sixth in a row, and also the first on the international capital market.

After we successfully realised the edition of the so-called senior preffered bonds in the amount of 45 million euros, which was the first such issue on the domestic capital market within the so-called MREL regulatory requirement, and with the successful issuance of an international euro bond, we’re continuing on our planned path. In accordance with our financing strategy, we’ve further diversified the sources of funds by issuing bonds, and we’ll use these collected funds for our core business, continuing to build a sustainable and successful business path for Erste Bank on the Croatian market,” said Kresimir Baric, the CFO of Erste Bank.

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