GIG: BNP Paribas has stayed the course in Greece despite a turbulent few years. What drove your decision to stay put? In retrospect, would you say it was the correct decision?
Pitaoulis: BNP Paribas is the largest bank in the eurozone and hence is in principal committed to the respective markets. With regard to the Greek crisis, we were convinced that all stakeholders had aligned interests to work for a mutually beneficial solution that would eventually construct a sustainable sovereign debt configuration and a viable banking sector. Finally, we saw, through our frequent interactions with foreign investors, that there were business opportunities in the country worth pursuing that could also assist Greece exiting the crisis in a timely and constructive way. It was definitely the right decision and we are satisfied that this is now acknowledged by both our Greek clients and also the foreign investors looking into Greece.
GIG: At the same time, BNP Paribas has maintained a focused approach as regards the Greek market. What would drive you to consider expanding your presence?
Pitaoulis: Indeed, we have been very focused and consistent with our approach in Greece over the course of the last years as far as the financial and official sectors are concerned. Meanwhile we have been strongly present in other areas like asset management and securities services, where we maintain a full branch servicing foreign investors in the local market. In addition, under the management of Mr. Yiannis Karamanolis, our bank has been committed to the international Greek shipping sector for a long time and has been recognised as one of the top leading banks in this field; it was named Greek Shipping Financier of the year 2018 by one of the most renowned international shipping journals. Lastly, we are currently reengaging the large corporate sector, hence we now cover the biggest part of the Greek client universe. There is indeed a number of drivers for BNP Paribas to deepen our Greek coverage like the increasingly normalised access to the debt capital markets for Greek issuers, the accelerated pace of privatisations, positive developments in certain sectors of the economy (energy, banking, tourism, and infrastructure among others) and elevated interest from foreign investors looking for credit and equity opportunities in a challenging international environment of low yields and scarce investment opportunities.
GIG: What are the key opportunities you presently see in the Greek market?
Pitaoulis: Sustainable GDP growth, disciplined fiscal performance, and improved credit ratings for the Hellenic Republic and other Greek issuers present a lot of opportunities whilst also resulting in lower expected returns for debt and equity transactions. In that context, we see an increased flow of opportunities in a number of areas. The Public Debt Management Agency (PDMA) has successfully paved the way in the debt capital markets and now has established a fairly liquid yield curve up to 10 years with a great composition of investor mix. This activity was followed by financial institutions and a number of Greek corporates. Given positive developments in the country and assuming international conditions remain benign, we expect this activity to evolve further and become more systemic and normalised for Greek issuers. We also see a selective array of opportunities coming from the equity capital markets from 2020 that will enable Greek companies to diversify their funding sources and accommodate their growth plans. Finally, we see a lot of activity in the mergers and acquisitions (M&A) space both for private sector assets as well as privatisations through the Hellenic Republic Asset Development Fund (HRADF).
GIG: Greek borrowing rates have improved considerably – more so than Greek ratings have. Is that, in your opinion, a fair reflection of the improvement in the underlying fundamentals of the Greek economy?
Pitaoulis: Yield conditions in the debt capital markets for Greek issuers have improved considerably in the last period, accommodated by a favourable international environment but mainly through the improvement of the specific credit metrics. That improvement has happened despite the lack of an investment grade rating for these issuers (OTE Group being an exception) and hence of Greek government bonds not being part of the European Central Bank’s quantitative easing operations. The rating agencies have followed Greek issuers closely and the improvements in their credit profiles have been reflected in the respective rating decisions. Further rating upgrades could be triggered mainly from sustainable macro data, improvement in the non-performing exposure perimeter of Greek banks, and tangible evidence of progress in privatisations, which would lead to increased foreign direct investment.
GIG: As more corporates are tapping bond markets, are you seeing an appetite for Greek corporate debt internationally? What would make an issue attractive to foreign investors?
Pitaoulis: There is clear evidence of increased interest from the respective investor universe for Greek corporates, as exhibited recently in the very successful OTE transaction, which delivered a remarkable outcome in terms of yield and investor mix, paving the way for others. We are convinced the current conditions will be sustained for at least the coming quarters and we expect more companies to take advantage of such positive environment. The issues that foreign investors are focusing on when reviewing a debt capital market transaction are, basically, a solid and sustainable business story in a sector that is attractive and well understood, good financials, management with proven track record, and clear corporate governance rules.
