Domestic Bonds

Successful issuance of Croatian bank bonds on the international capital market

July 2, 2021 – The first Croatian bank bond issue on the international capital market has been a success, with the popular Erste Bank taking another courageous step at national and European level.

As Poslovni Dnevnik Written, these Croatian bank bonds were issued with an annual interest rate of 0.75% and a yield to maturity of 0.835%. With the completion of this transaction, Erste Bank has gone one step further and added its first international euro bond to its existing securities outstanding 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 main objective of this Croatian bank bond issue is to meet the regulatory requirement that the bank must comply with by January 1, 2024, and the first binding requirement of the transition period must be met by here January 1, 2022. This concerns the so-called MREL (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 to prevent the systemic risk. The funds raised by this Croatian bank bond issue will be used for general financing purposes and to encourage green and sustainable investments, and will also contribute to the diversification of sources of financing.

The issue was aimed at institutional investors in the international market, and in the final award the largest share was played by international financial institutions with a 39 percent share, followed by investment funds with 32 percent. percent, banks with 15 percent and pension funds and insurers with 14 percent. More than 70 institutional investors participated in the issue, with a very pronounced European geographic diversification (United Kingdom and Ireland with 41%, Germany and Austria with 27%, CEEC with 11%, France with 6%, and Switzerland, the Benelux countries and others with smaller share percentages).

The co-agents of the issue were BofA Securities Europe SA, Erste Group Bank AG, Landesbank Baden-Württemberg and Société Générale.

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

After having successfully completed the edition of the so-called senior privileged bonds for an amount of 45 million euros, which was the first issue of this type on the national capital market within the framework of the so-called MREL regulatory requirement, and with the successful issuance of a euro bond, we are continuing our planned trajectory. In line with our funding strategy, we have further diversified the sources of funds by issuing bonds, and we will use these collected funds for our core business, continuing to build a sustainable and successful business trajectory for Erste Bank in the Croatian market, ‘ ‘said Kresimir Baric, Chief Financial Officer of Erste Bank.

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