Greek banks made the case for their covered bonds pricing inside government bonds at an ECBC plenary on Wednesday, highlighting their track record and rating differentials, and while 2025 issuance is unlikely, one pioneering issuer noted that timing has previously surprised.

On a panel at the European Mortgage Federation-European Covered Bond Council (EMF-ECBC) event in Athens, representatives of the four Greek issuers were asked when the next public issuance could emerge, by moderator Elena Bortolotti of Barclays and ECBC rating agency approaches working group chair. The last Greek euro benchmark supply was a spate of issuance between October 2017 and January 2018, kicked off by a National Bank of Greece (NBG) comeback.

“I think we all agree it’s a matter of ‘when’, rather than ‘if’, at this stage,” said Dimitris Spathakis, Piraeus Bank. “I think it’s clear by now that we all cherish and we like this instrument. We have been trying to optimise this, and we are all now at double-A area levels – the rating path is improving.”

He noted that Greek banks have in recent years been focused on the unsecured space.

“We have been spending enormous time and effort in building up our capital buffers and meeting our MREL leads, which by now all of us have met,” said Spathakis. “So covered bonds were nowhere near the funding plan agenda.

“I think that as we start to move back to a funding mix normality, if I can use the term, the covered bond is the obvious next step,” he added, “for the tenor diversification, instrument diversification, and, most importantly, to make sure that the last missing bit of investor audience, somewhere around the centre of Europe, that has not been looking still very rigorously on Greek banks, is tapped as well.

“Is it a 2025 business? I think not, but we are getting there.”

Eurobank’s Dimitris Psichogios said balance sheet developments at an aggregate level did not call for an imminent return to covered bond issuance, with the volume of mortgages outstanding declining in Greece, for example.

“Issuance at the moment would be effectively superfluous and could not be easily justified,” he said. “So the ambition may be there, but you need to have conditions supporting the exercise.

“We need to see balances becoming positive and consistently so, because it wouldn’t make sense to issue once, as we did in 2018, and not issue for a few years. If we come to the market, it would likely need to be some plan that we have to be accessing the market on a consistent basis, as the Nordics do, for example.”

Psichogios said a final decision would also need to be taken on whether conditional pass-through issuance, as previously commonly used in Greece (also in retained issuance, at times off different programmes of the same issuer), would still be appropriate.

“It was a fad to issue CPT a few years back,” he said. “Now everything seems to be moving towards the soft bullet.”

Public covered bond issuance is not part of Alpha Bank’s 2025 funding plan, but Ioannis Asimelis at Alpha Bank said the issuer will examine it for 2026, taking into account pricing levels, residential mortgage market developments, and NSFR.

“For the time being,” he added, “we are working on harmonising our public covered bond programme to ensure that we are operationally ready when the time comes.”

NBG’s Vassilis Kotsiras said that while banks globally had been busy adjusting their capital stacks and funding mix after the global financial crisis, the European Central Bank had dominated the covered bond market through its purchase programmes, meaning that among private investors, only bank treasuries were consistently focused on the asset class. However, he suggested a growing appreciation of the product among real money investors.

“We have seen recently the Iccrea transaction,” said Kotsiras, “which was a very promising transaction for the whole market, because it was a double-A issue and came at levels that made sense, they came at levels with a significant difference versus their senior preferred.”

Last Monday (28 April), Italy’s Iccrea Banca issued the first euro benchmark covered bond in almost two weeks and the first peripheral euro benchmark for two months, a €600m 5.5 year OBG priced at 52bp over mid-swaps.

“So I really believe that with this market environment developing, we will have much easier decisions to take on whether we will tap the market or not,” said Kotsiras.

“Lately, we have seen a lot of resilience of the product,” he added. “Within the tariff turmoil, covered bonds have performed very well, regardless of the rates volatility. Iccrea has done this important step after Novo Banco a few months earlier. So I think we’re in a positive trajectory.”

Kotsiras also dangled the prospect of a surprise Greek euro benchmark sooner than his peers had implied, noting that when NBG inaugurated issuance in 2009, traditional factors had not pointed towards such a move.

“In 2017,” he added, “nobody was expecting Greek banks to start with covered bonds.”

With pricing to be a key factor in the timing and execution of the return of benchmark issuance, Bortolotti invited the Greek representatives to share their early thoughts on appropriate considerations – and they were bullish on pricing inside government bonds, not least because of the country’s experience.

“The Greek covered bond of NBG that was issued in 2009 was the only instrument overall in the financial and public sector not being affected by all the turmoil,” said Kotsiras when highlighting how CPT structures had been appropriate for Greek covered bonds.

“Why should covered bonds be trading with a premium over the sovereign?” he later added. “I don’t know who is setting this rule, but the reality is that they have multiple notches of better rating than the sovereign. They have the non-bail-inability, which has been tested in jurisdictions like Greece, Portugal and other countries. They have amazing credit elements, collateral that really has value.

“So I think that the more the product is finding a foothold, more and more real money investors will be stepping in, and they will understand the merits and value of this product.”

Piraeus’s Spathakis seconded and expanded upon this argument.

“We are going to be testing this when the time is right, but it needs to be made clear that, unlike other jurisdictions, the delta versus the sovereign rating is significantly larger. So it is an unfair, to my eyes, to expect a spread against the Greek sovereign.”

Eurobank’s Psichogios agreed with Kotsiras on the importance of Iccrea’s transaction, which was priced 9bp below the BTP of the same maturity, the tightest such level achieved on an OBG of five years or longer since June 2022, according to the Italian issuer,.

“Our issues need to be fairly, properly priced,” said Psichogios, “and that would mean levels that are lower than the levels that were indicated just a few weeks back.”

Pictured (left to right): Bortolotti, Asimelis, Kotsiras, Psichogios, Spathakis