Banks Buoyed by ECB Cash Boost Sales of Unsecured Debt

Banks in Europe are boosting sales of senior unsecured bonds as the European Central Bank provides lenders with more three-year cash than economists predicted.

UniCredit SpA (UCG) and Banca Monte dei Paschi di Siena SpA (BMPS) in Italy and Brussels-based KBC Bank NV raised a total of 4 billion euros ($5.4 billion) from unsecured notes today, according to data compiled by Bloomberg.

Banks sold 40.2 billion euros of senior unsecured debt this year, up from 11.7 billion euros in the second half of 2011 when sales stalled amid investor concern that banks may be hurt by losses on sovereign debt, Societe Generale SA data show. Issuance surged after the ECB started its so-called longer-term refinancing operation, a program of cheap three-year loans to boost bank liquidity.

Banks’ “ability to issue at this point is pretty much all on the back of the improvement in market conditions that’s arisen since the first LTRO,” said Roger Francis, an analyst at Mizuho Securities Ltd. in London.

The ECB allotted 529.5 billion euros to 800 banks in its second LTRO today, more than the 470 billion euros predicted by economists in a Bloomberg News survey. Lenders tapped the Frankfurt-based central bank for 489 billion euros in the first LTRO in December.

UniCredit, KBC

UniCredit sold 1.5 billion euros of five-year bonds that will be priced to yield 345 basis points more than the benchmark swap rate. The Milan-based bank’s existing 1.25 billion euros of senior unsecured notes due 2013 have a 224 basis-point spread, which has shrunk from as much as 938 in November, Bloomberg Bond Trader prices show.

Andrea Morawski, a spokesman for UniCredit, didn’t respond to calls seeking comment.

Siena, Italy-based Banca Monte dei Paschi di Siena sold 1.25 billion euros of two-year securities at a spread of 365 basis points.

KBC, Belgium’s biggest bank, issued 1.25 billion euros of two-year senior unsecured bonds through its KBC Ifima NV unit, according to spokesman Dirk Van Damme in Brussels. The securities will yield 255 basis points more than swaps, he said.

KBC got “overwhelming demand from a large group of pan- European investors” for the bonds, Van Damme said.

To contact the reporters on this story: Katie Linsell in London at klinsell@bloomberg.net; Ben Martin at bmartin38@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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