Bank raises €750m in unsecured bond sale

Bank of Ireland has raised €750m through a five-year senior unsecured bond at a yield of 3.337%, which compares very favourably to other eurozone banks of a similar profile.

The issue was five times oversubscribed with a total order book of €3.75bn.

The bond was sold to 240 investors with 97% of the eventual allocation placed with international funds.

The price was 210 basis points over five year mid-swaps.

“[This] transaction strongly underlines Bank of Ireland’s ongoing ability to access capital markets at improving prices since returning to the public bond markets with a range of covered bond trades, as well as senior and subordinated debt issuance over the past 14 months,” it said in a statement

“Overall, the trade is a vote of confidence by international bond investors in Bank of Ireland and Ireland and reflects the significant progress which has been made and is being made by the group and Ireland.”

The 3.337% yield is better than most Spanish and Italian banks of a similar size.

Bank of Ireland had been locked out of the markets between 2009 and late 2012 as it struggled with heavy property related losses.

However, the bank is on course to return to bottom-line profitability this year.

It still faces a number of challenges. It has a €17bn tracker mortgage book that is mostly loss-making because the bank’s cost of funding exceeds the returns on these products.

And even though its cost of funding has improved over recent months, the European Central Bank has lowered the main interest rate to an historically low 0.25%, which puts further pressure on margins.

Early last month, it raised €580m in new equity in order to refinance the Government’s €1.8bn of preference shares in the bank.

In addition, it passed the Central Bank’s balance sheet assessment, although it was forced to raise loss provisions by €1.3bn.

Lead investment banks on the transaction were Citibank, Deutsche Bank, Morgan Stanley, Nomura, and Royal Bank of Scotland