Nordea Bank AB (NDA), the Nordic region’s largest lender, joined ABN Amro Bank NV and Rabobank Nederland in selling the first senior unsecured debt in more than a month as European banks in top-rated countries seek to satisfy investor demand for yield.
ABN Amro, which is owned by the Dutch state after a 2008 bailout, and Rabobank (RABO), which is graded Aaa at Moody’s Investors Service, are helping re-open a market all but closed to European lenders since mid-2011 because of the region’s deficit crisis. The Netherlands, like Sweden, where Aa2 rated Nordea is based, holds top grades from the ratings firms.
Investors are shunning senior unsecured debt from lower- ranked banks amid concern their governments may default, bringing down financial systems. That wariness is forcing lenders to turn to secured borrowings, including covered bonds and repurchase agreements, as well as borrowing 489 billion euros ($636 billion) from the European Central Bank for as much as three years in the central bank’s longest-ever refinancing operation.
“The banks have got to take advantage of any solidity in the markets because the level of funding they have to do is scary,” said Alison Murdoch, a credit strategist at Ria Capital in Edinburgh. “From an investor’s perspective, these deals are a steal.”
Nordea sold two-year floating-rate notes that were priced to yield 95 basis points more than the benchmark euro interbank offered rate (EU0003M), as well as 4 percent fixed-rate bonds due in July 2019 that priced at 195 basis points over the mid-swap rate, according to data compiled by Bloomberg.
Utrecht-based Rabobank’s unsecured 10-year bonds were priced to yield 175 basis points more than swaps, according to Bloomberg data. ABN Amro priced 1.25 billion euros of two-year floating-rate notes yielding 150 basis points more than Euribor and 1 billion euros of seven-year bonds with a spread of 275 basis points over swaps.
Spain’s Banco Santander SA issued the last benchmark senior unsecured bond in euros on Nov. 24 in an exchange for existing securities, according to data compiled by Bloomberg.
“The window is basically open for senior unsecured and Rabobank and the Scandinavians are obvious names,” said Oliver Judd, a credit analyst at Aviva Investors in London, which manages about $257 billion in fixed-income assets. “The ECB has definitely helped sentiment by showing there’s a funding backstop for the banks.”
The Netherlands bought Fortis’s Dutch banking and insurance units and its stake in ABN Amro Holding NV in 2008 after the company, now named Ageas, ran out of short-term funding. The government plans to sell ABN Amro shares in 2014 at the earliest.
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