YEREVAN, April 25. /ARKA/. Eurobond issuance by banks in the CIS+ region (comprising Armenia, Azerbaijan, Georgia, Kazakhstan, Ukraine and Uzbekistan) will increase significantly in 2024 and 2025, albeit from a low base, Fitch Ratings forecasts. This is driven by refinancing needs, favorable economic conditions and positive investor sentiment, according to the rating agency’s research.
Eurobonds totaling $1.4 billion were issued this month, and total issuance this year has already surpassed the recent peak of $1.3 billion in 2020.
The study notex that Eurobond issuance fell sharply in 2022 and 2023, when market volatility due to the military conflict in Ukraine and rising interest rates scared away investors. The recovery this year has been driven by the $2.7 billion of debt maturities scheduled for 2024-2025, but has also been supported by favorable economic conditions, which should continue to drive loan growth, and strong banking performance. Banks in the CIS+ region, like those in the GCC and Turkey, also benefited from improved investor sentiment towards emerging markets in Q1 2024, as well as investors seeking to lock in higher interest rates.
According to Fitch, subdued demand following a long period of limited issuance and the closure of Russian issuers from international markets also played a role in the revival of issuance by CIS+ banks. Russian issuers used to be the largest borrowers in the region, and some investors may be turning to the wider CIS+ region to fill the gap. Lower US dollar interest rates should also encourage further issuance. Fitch expects the Fed to cut rates by 75 bps in 2024 and 125 bps in 2025.
Among Armenian banks mentioned in the rating agency’s study is Ardshinbank (BB-/stable outlook), whose loan/deposit ratio benefited significantly from a large deposit inflow in 2022, mainly from Russia. Moreover, as Fitch points out, this ratio has almost halved to 72% at end-2023 compared to 141% at end-2021.-0-
