Banks looking for long-term sources of cash

The decline in savings kept in banks month by month and especially the reluctance towards long maturities are now forcing banks to find other sources of long-term cash. The solution seems to come in form of bonds, which are new financing instruments, as far as the Romanian market is concerned, but common practice for mature economies.

Banca Comerciala Romana (Romanian Commercial Bank – BCR), the largest Romanian bank last week announced it was planning to release an up to 150 million euro issue of eurobonds on the international markets in the first half of next year and now BRD-Groupe Societe Generale is having similar plans.

Banca Romana pentru Dezvoltare (Romanian Development Bank – BRD)’s Board of Directors decided to call the General Meeting of Shareholders to endorse the plans for issuing bonds next year. The notification that was sent to the Bucharest Stock Exchange (BSE), where the bank is listed, is rather vague, without going into details about the red herring.

“If we wanted to say so much in this document then there is only so much we have to say at the moment. What I can tell you, however, is that we will go for ROL and have not decided yet whether to have one or more issues. The thing is we will go for two to five-year maturities. Anyway, the General Meeting of Shareholders will endorse a leverage cap, which may be worth thousands of billions of ROL,” Bogdan Baltazar, BRD’s chairman of the Board of Directors told Ziarul Financiar.

He says the decision was made in an attempt to secure longer-term financing resources, given that “the longer-term liquidity situation has become quite tense lately.” The increasing demand for longer-term financing over the last twelve months, especially aimed at mortgages or investments, has caught banks unprepared, particularly because liquidity norms require them to maintain a well defined balance between cash attracted and cash invested for a specific period of time. Most of the cash attracted by banks from either individuals or legal entities is actually invested for short and very short terms.

The intentions of the two trend-setters on this market, i.e. the top and second top bank in the system, would be the first answer to the urging of the National Bank officials who were advising Romanian banks to start thinking of issuing bonds if they planned to have medium and long-term resources available. It remains to be seen how well the investors, either foreign or Romanian, will respond to the banks’ attempts to issue such instruments. The price paid will undoubtedly weigh heavily on the decision to invest. oana.nuta@zf.ro