Paraguay State Bank BNF Eyes First Public Bond Issuance in 2019

(Bloomberg) -- Paraguay’s state-run Banco Nacional de Fomento plans to tap the local debt market for the first time this year with the initial tranche of a bond program of at least $50 million, according to the bank’s Chairman Daniel Correa.

BNF is considering a Guarani-denominated bond with a duration as long as 10 years “to participate in projects like infrastructure” that require long-term funding, Correa said in a telephone interview.

In 2012, the bank sold 10-year bonds for 50 billion guarani (about $8.3 million) to social security agency IPS in a private placement.

BNF also plans to obtain an international credit rating by the end of next year with a view to sell bonds overseas before the current government steps down in 2023, he said. Private sector banks Banco Continental and Banco Regional have issued a combined $500 million in global bonds in the last seven years.

Paraguayan President Mario Abdo Benitez tapped Correa, a former deputy finance minister and executive at the local unit of Argentine brokerage Puente, to run Paraguay’s No.5 bank by deposits shortly before taking office last August. Correa faces the challenging task of implementing a $40 million investment plan aimed at modernizing the 57-year-old institution, while fulfilling the bank’s mandate to attend underserved sectors of the economy.

Mortgage, consumer and small-business loans will underpin estimated growth of 15 to 20 percent in BNF’s credit portfolio this year, said Correa, who sees deposits growing 10 to 15 percent.

After losing exclusivity over public sector deposits at the start of this year, BNF has started to compete more aggressively for private sector and pension fund deposits with higher interest rates. Government money accounted for around half of the bank’s 8.7 trillion guarani of deposits at the end of September, according to central bank data.

“We historically pay lower interest rates on deposits, but with the state guarantee we have BNF is much more attractive” than other banks, he said.

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