1. finance
2. bank

In association with
NORDIC FIs
& COVERED
INSIDE:
2 Eiendomskreditt covered upped;
Planned CRR waiver positive for
Swedish covered, says Moody’s
4 DNB diversifies via £250m debut
5 Nordic euro FI spread data
Swedbank debuts as Nordics
hit finely-poised AT1 en masse
DNB first Nordic bank
to launch green bond
with renewables deal
Friday, 13 February 2015
Danske and Swedbank this week hit a
hectic Additional Tier 1 (AT1) market
and Handelsbanken and Nykredit
Realkredit mandated debuts in spite
of some weakness in the hybrid asset
class, while DNB today (Friday)
stuck to its domestic market for its
first AT1.
The week’s supply — which also took
in deals from Spain’s BBVA and UBS of
Switzerland — marks the first big wave
of AT1 issuance this year, after Rabobank launched the first Dutch AT1 last
month. It comes after many banks, including those in the Nordics, announced
their 2014 results.
BBVA kicked off the activity on Tuesday — after fellow Spaniard Banco Popular Español on Thursday of last week
(5 February) finally sold a long-planned,
Eu750m AT1, albeit as a club deal. BBVA
sold Eu1.5bn of perpetual non-call five
securities with a coupon of 6.75%.
However, as Danske Bank was proceeding to launch a Eu750m perpetual
non-call seven AT1 on Wednesday the
market softened, with BBVA’s issue
trading below par, although Danske and
then Swedbank on Thursday were able to
get their transactions away successfully.
“In general, the tone in the AT1 or Tier
2 subordinated market continues to be
very constructive, particularly for top
tier, debut issuers,” said Vincent Hoarau,
head of FIG syndicate at Crédit Agricole
CIB. “The market continue to be driven
by the extraordinary liquidity situation
rather than fundamentals.
“I just fear that investors are likely to
use the knowledge of a surge in supply
to demand higher premiums, particularly for repeat borrowers looking for big
size. As expected, volumes are huge
and windows are limited, so competition amongst issuers is high and the first
movers are gaining a strong advantage.”
Swedbank had announced its inaugural AT1 issue at the end of last week and
held a three day roadshow from Monday
(continued on page 3)
Issue 114
DNB on Wednesday became the first
commercial bank from the Nordic
region to sell a green bond, issuing a
Nkr1bn (Eu115m) five year deal whose
proceeds are earmarked for financing
renewable energy projects.
DNB said that its green bond was
independently assessed by DNV GL,
which assesses, classifies and advises on
ship and energy matters, and was found
to conform to Green Bond Principles, a
set of recommendations for green bonds
established by a group of financial institutions that the International Capital
Market Association (ICMA) supports.
The bank said that as a significant market participant in the financing of energy
and the renewable sector in Norway and
internationally it is well positioned for
strong growth anticipated in these areas,
especially solar, wind and hydroelectric
power.
“Green bonds are a very exciting instrument, and the capital raised enables us
to finance major parts of 14 hand-picked
wind power projects in which DNB is involved in Ireland, England and Sweden,”
said Berit Henriksen, head of DNB’s energy division. “We believe that the green
(continued on page 4)
Latest Nordic FI benchmarks
Senior unsecured (z spreads mid)
NDASS
JYBC
DANBNK
1.125%
FRN
FRN
02/25
06/17
11/18
38bp
31bp
34bp
Covered bonds (asw spreads mid)
POHBK
NDASS
SHBASS
1.000%
1.000%
0.625%
11/24
11/24
11/21
-4bp
-4bp
-3bp
Source: CACIB trading 11/2/15
Page 1
Friday, 13 February 2015
Eiendomskreditt covered
upped to AA+ by S&P
Standard & Poor’s upgraded a covered
bond programme of Norway’s Eiendomskreditt AS backed by commercial
mortgages from AA to AA+ on Tuesday, on negative outlook, after applying recently-revised rating criteria.
The Norwegian issuer’s programme
had been placed on “under criteria observation” in January, following publication
of the updated criteria in December. The
changes introduced a reference rating
level (RRL), which revises the starting
point of S&P’s analysis. In Eiendomskreditt’s case, this is “bbb”, in line with
the Issuer Credit Rating of BBB.
S&P said its assessment of the expected jurisdictional support for mortgage
covered bond programmes in Norway is
“very strong”, meaning Eiendomskreditt’s programme can benefit from an uplift of up to three notches from the RRL
to a jurisdiction-supported rating level of
“a”. Under S&P’s previous classification
or countries Norwegian programmes
were assigned to programme category 2.
Following further analysis of the cover pool, liquidity support and committed overcollateralisation, S&P assigned
the maximum possible rating under its
methodology, AA+.
A negative outlook on the programme
reflects S&P’s outlook on the issuer. n
Issue 114
Planned CRR waiver positive for
Swedish covered, says Moody’s
A partial waiver from certain CRR
requirements proposed by the Swedish FSA to reduce concentration
risk would be credit positive for
Swedish covered bonds, according
to Moody’s, as it would allow programmes to maintain protections
against market risks.
On Monday of last week (2 February), the Swedish FSA (Finansinspektionen, or FI) proposed an exemption
for Swedish issuers from the requirements of Article 129(1)(c) of the Capital Requirements Regulation (CRR),
which rule that exposures to credit
institutions that are used as substitute
collateral for covered bonds (which are
to achieve preferential treatment) must
not exceed 15% of the nominal amount
of the issuer’s outstanding covered
bonds and be credit quality step 1
(CQS 1) — or at least Aa3.
Competent authorities are able to
partially waive this requirement and
allow CQS 2 up to 10% of the total
after consulting with the European
Banking Authority (EBA).
As previously reported, the Danish FSA (Finanstilsynet) received the
EBA’s endorsement of such a waiver
on 19 December after highlighting that
Nordic FIs & Covered Bonds
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Page 2
In association with
Vincent Hoarau
Head of FIG Syndicate
[email protected]
+44 20 7214 6162
Julian Burkhard
Global Head of Capital Solutions,
Head of FI DCM Nordics & UK
[email protected]
+44 20 7214 5472
Florian Eichert
Senior Covered Bond Analyst
[email protected]
+44 20 7214 6402
the rule increased concentration risk,
since only one Danish credit institution
qualifies as CQS 1.
Arguing that a similar concentration
problem could arise in Sweden, FI said
it hopes to be able to introduce a waiver on 31 March.
Moody’s this Monday noted that
under the standard CRR requirements
only two Swedish banks — Nordea
Bank and Svenska Handelsbanken —
would be eligible swap counterparties
with sizeable Swedish krona currency
swap offerings among Nordic banks,
while most Swedish covered bond programmes use swap arrangements with
swap counterparties rated single-A.
The rating agency said the proposal,
if implemented, is credit positive as it
would allow Swedish programmes that
benefit from structural enhancements
from single-A-rated counterparties
to maintain their current protection
against market risks.
Without the waiver, these programmes would either have to maintain their preferential treatment by
cancelling exposures to single-A-rated
entities — therefore losing the structural enhancements that the removed
counterparties provided — or maintain
the structural enhancements and lose
preferential treatment under the CRR
— increasing refinancing risk because
demand from bank investors would
likely drop sharply, Moody’s said.
“If covered bonds lose their preferential treatment, the programmes
would face higher refinancing risk and
the bonds’ liquidity would decrease,”
the rating agency said. “Bank investors
hold around 40% of publicly-placed
covered bonds and losing preferential
treatment in the liquidity coverage and
capital adequacy calculation would
result in higher capital costs for bank
investors holding such bonds.
“This, in turn, would increase the
risk that in the event of an issuer insolvency, the realisable value of the cover
pool would be less than what was required to repay investors.”
The Swedish FSA announced that it
would hold a meeting for the consultation on Tuesday. n
Issue 114
Friday, 13 February 2015
Nykredit, Handelsbanken to debut, Danske back
(continued from page 1)
to Wednesday before leads BAML, BNP
Paribas, HSBC, JP Morgan and SG went
out with the dollar perpetual non-call
five transaction on Thursday morning.
“Despite the slightly softer market tone
and large amounts of anticipated supply,
we received phenomenal investor interest
from the outset, with initial price thoughts
of 5.75% for a size of $500m-$750m,”
said a banker at one of the leads.
After orders quickly reached more
than $2bn guidance was set at 5.5%5.625% and a $750m was ultimately
priced at 5.5% on the back of a $2.5bn
book comprising over 200 accounts.
“There was minimal pricing sensitivity in when final terms were set at $750m
at 5.5%,” said the lead banker, “offering
only a very modest new issue premium,
which stands in stark contrast to recent
AT1 issues that paid concessions in the
region of 30bp-50bp. The deal traded up
to 100.50 on the break, demonstrating
investors’ ongoing support for the issue
in the secondary market.”
He cited a strong capital and earnings
generation story coupled with investment grade ratings as reasons behind the
deal’s success.
Unlike other Nordic AT1 issuance,
Swedbank’s instrument included equity
conversion rather than temporary writedown language.
“The equity conversion feedback was
very positive and was considered as a
cleaner structure and more favourable
to investors,” said another lead banker.
“Swedbank’s mechanism was by some
considered to be worth approximately
25bp in terms of spread reduction relative to peers.”
He added that the level achieved by
Swedbank was well through the secondaries of Nordea and SEB, which were the
first two Swedish banks to issue AT1.
Swedbank CFO Göran Bronner said
the issuer was very satisfied with the deal.
“Despite a turbulent market we successfully achieved a price at the same level as
the lowest in the market for equivalent
instruments,” he said. “This demonstrates
Swedbank´s strong position and high
confidence in the investor community.”
Swedbank said that the deal was
launched to optimising the bank’s capital
structure and fulfils new European capi-
tal regulations that aim to avoid taxpayers having to support banks in stressed
situations. The banks’ Tier 1 capital ratio
was strengthened by 1.5% to 24%, as per
31 December 2014, according to Swedbank, which said it will not issue again
until the end of 2017.
Danske launched its new AT1 issue
after having reported its 2014 results on
Tuesday of last week (3 February), and
Peter Holm, senior vice president, group
treasury, said that the bank had been planning internally to issue after the results
and it announced its plans on Monday.
“We then saw several other issuers
with the same idea and so there was a
little bit more traffic than we had perhaps
anticipated,” he said. “But we listened to
our leads and stood by our initial plan.
“Since we had been on the road in Europe last year we thought that it was unnecessary to do so again, but rather hold
a global conference call with investors
and some one-on-ones the day before
launch. We had some 80 participants on
the call and this proved to be the right
strategy. There were relatively few questions from the investor community about
what we were doing and the instrument
we were issuing, so they were well aware
of our particular product.”
On Wednesday morning leads BNP
Paribas, Credit Suisse, Danske, JP Morgan and SG went out with initial price
thoughts of the 6% area and, in spite
of a weaker market backdrop of underperforming recent supply, by noon had
taken indications of interest of over Eu2bn, according to a syndicate official at
Danske. The books were then opened
with guidance of 5.875% plus or minus
0.125%, and an hour later a final coupon
of 5.875% was set for a targeted Eu750m
issue size. The syndicate official said
that some 200 investors were involved.
“The overall placement was very
granular across diverse jurisdictions
and investor types as a testimony to the
widespread name recognition of Danske
Bank,” he said.
Holm nevertheless noted how the
book size contrasted with that of its inaugural AT1 in March 2014 — a Eu750m
perpetual non-call six issue that was the
first Nordic AT1 — and said that this reflected the way the market has changed
in the interim.
“When we went out at that time there
were not many issuers able to tap the
market, but there was a lot of interest in
the product and we had a tremendously large book of close to Eu13bn, with
some 700 investors,” he said. “Since
then we have seen what I would call a
normalisation of the market.
“Particularly in the latter part of last
year there were some hiccups in the
market and, although the market recovered somewhat in January, we have not
seen these huge order books that we saw
at the beginning of 2014. We ended up
with a little over Eu2bn this time, but we
had the right investors in the deal for the
right size and the right price, and overall
we got a good result.”
Alongside its results, Danske announced an increased dividend of Dkr5.5
per share and a Dkr5bn share buyback
for 2015. It has also announced it will be
calling a Eu700m Tier 2 issue in March.
“We have been adjusting to the new regime for capital instruments under CRR/
CRD IV and this issue continues that
process,” said Holm. “The starting point
is that we have a very strong capital position and in issuing the new Eu750m AT1
and repaying the Eu700m of Tier 2 we
are increasing the quality of our capital
base — although it should also be seen
in the context of the share buyback.”
Handelsbanken has meanwhile mandated Deutsche, Goldman Sachs, JP
Morgan and SG as joint lead managers
for an inaugural AT1 issue, a US dollar temporary write-down instrument
with expected Baa3/BBB/BBB ratings.
Launch is expected after a roadshow
starting on Monday.
Nykredit Realkredit is also readying
its AT1 debut, which will be launched
in euros via BAML, Citi, HSBC and
Nykredit Markets. At the same time, it
is redeeming Eu900m of outstanding hybrid Tier 1.
“The redemption and new issue are
part of Nykredit’s efforts to align its capital structure to European and national
capital requirements for banks,” it said.
And DNB today sold its first AT1 issue, in its domestic, Norwegian krone
market, a Nkr2.15bn (Eu247m) perpetual non-call five issue paying three month
Nibor plus 325bp. The bank said that the
transaction was very well received. n
Page 3
Friday, 13 February 2015
Issue 114
DNB debut £250m FRN offers diversification
DNB Bolgikreditt made its sterling
covered bond debut on Monday with a
£250m (Nkr2.90bn, Eu336m) five year
floating rate, and an official at the issuer said the maturity, format and
currency suited its needs.
Sindre Nikolaisen, vice president, long
term funding, at DNB, said that the decision to go for the five year sterling issue
was driven by two factors.
“One is that in general we like to diversify out of the euro market if we can,”
he said, “and the pricing looked attractive for a five year sterling deal.”
The deal was announced as a benchmark-sized transaction with guidance of
three month Libor plus the 28bp area,
and ultimately priced at 28bp over by
sole lead Nomura. A syndicate official
at the lead said this compared with a
£250m Lloyds July 2020 issue quoted at
24bp/21bp that was issued last year.
Nikolaisen said that the pricing was
probably inside what could have been
achieved on a euro benchmark. The
lead syndicate official said that the 28bp
sterling level is equivalent to flat to 1bp
through mid-swaps for a euro benchmark and that a DNB October 2019 euro
benchmark issued in September at minus
3bp was at minus 2bp on Monday, implying that, taking into account a new issue
premium, a new euro benchmark would
come wider than the sterling FRN.
He said that the transaction also allowed DNB to attract the attention of
key sterling accounts, with almost 90%
of the deal going to UK buyers and the
deal split roughly 40% to funds and 45%
to bank treasuries.
DNB’s issue came after six sterling
FRNs issues, one a tap, totalling some
£3.4bn in the three year part of the sterling curve so far this year, with all but
one of the new transactions priced at
19bp over.
The lead syndicate official said that
the transaction was targeted at extending
the availability of longer dated FRN paper in sterling, with little of such quality
being available apart from some European Investment Bank trades. DNB’s
Nikolaisen cited two reasons why the
issuer chose the five year maturity.
“In general we don’t do three years,”
he said, “not at all, actually. For us, anything shorter than five years is not that
interesting. And we have very few maturities in 2020, so it fits our profile.”
DNB’s sterling issue comes after it
raised large amounts in floating rate
notes in euros last year.
“We would swap any fixed rate transaction into floating rate anyhow, so we
don’t have any preference in that sense,”
said DNB’s Nikolaisen. “But there seems
to be a good demand for floaters. And it
is easier to tap these larger semi-public
FRNs, as we have done, than to do so
with fixed rate deals.”
Nikolaisen said that DNB will issue
more this year than last.
“We have maturities of Nkr85bn this
year, and basically with some small
growth, that’s approximately the level we
estimate to do this year,” he said. “And
we also plan to have an overweight of
covered to senior in this, more or less the
same as before — we still have good capacity in our cover pool and it’s cheaper
for us to do covered rather than senior.”
Nikolaisen said that investors have in
general raised questions about how the
fall in oil prices will affect the Norwegian economy and real estate prices.
“We have focused on the fact that
even though Norway will have a bit
slower growth than before, the growth
in the economy is still there,” he said,
“and relative to other European and
even other Scandinavian countries the
Norwegian economy still has strong
fundamentals, even with the current oil
price outlook.” n
Banks expected to join green bond trend in 2015
(continued from page 1)
bond market has a bright future, and DNB
would like to be part of this.
“We note that institutional investors
and private savers are increasingly interested in sustainable investments, and
some investors also have their own specific ‘green’ or sustainable asset management mandates,” he added. “This means
that green bonds could give us access to
new and different sources of capital than
our ordinary bond issues.”
Page 4
According to a funding official at
DNB, the five year issue was priced at
52bp over three month Nibor, which he
said was on a par with what the bank
would achieve with a standard bond issue in the Norwegian market.
The new issue will be listed on the Oslo
Stock Exchange in a new green bond list
that has recently been established.
Tanguy Claquin, managing director and
head of sustainable banking at Crédit Agricole CIB, welcomed DNB’s transaction,
and forecast more activity from banks.
“For green bonds, 2015 is expected to
be a year of financial institutions,” he said.
“We are replicating green bonds in all markets and the only place where we are really
still lacking big benchmark transactions is
in the financial institutions space.
“This is the first in Scandinavia, but
it’s still a small trade, and many people
would expect a large financial institution
to bring a real green benchmark to the
market this year.” n
Issue 114
Friday, 13 February 2015
Euro Nordic covered bond & senior unsecured secondary spreads
Nordic benchmarks: covered versus ASW, senior unsecured (shaded) versus Z spreads, 11/2/15.
ISIN
Coupon
AKTIA (*AKTIA REMB)
XS0640889803*
3.125
XS0946639381
1.125
XS1056447797
1.000
BRF
XS0882166282
2.500
DANBNK
XS1113212721
0.375
XS0469000144
4.125
XS1071388117
1.250
XS0519458755
3.750
XS0802067636
2.500
XS0627692204
3.875
XS0751166835
3.875
XS1139303736
3mE+35
DNBNO
XS0728790402
2.375
XS0877571884
1.000
XS0992304369
1.125
XS0794233865
1.875
XS1117515871
0.375
XS1137512742
3mE+10bp
XS0637846725
3.875
XS0759310930
2.750
XS0856976682
1.875
XS0522030310
3.875
XS0595092098
4.375
XS0732513972
4.25
EIKBOL
XS0736417642
2.250
XS0851683473
1.250
XS0794570944
2.000
XS1044766191
1.500
JYBC
XS0856532618
3mE+110bp
XS1078186001
3mE+50bp
LANSBK
XS0926822189
1.125
MINGNO
XS0893363258
2.125
XS1069518451
1.500
NDASS
XS0478492415
3.500
XS0731649660
2.375
XS0965104978
1.375
XS1014673849
1.250
XS0778465228
2.250
XS0874351728
1.375
XS0591428445
4.000
XS1132790442
1.000
XS0916242497
1.375
XS0728763938
4.000
XS0520755488
4.000
XS1032997568
2.000
XS0801636902
3.250
XS1189263400
1.125
NYKRE (*senior secured)
LU0787776052*
3.250
LU0921853205*
1.750
LU0996352158*
1.750
Maturity
Mid Spd
22/06/2016
25/06/2018
15/04/2019
-3
-8
-7
31/01/2018
39
26/08/2019
26/11/2019
11/06/2021
23/06/2022
09/07/2015
18/05/2016
28/02/2017
19/11/2018
-4
-4
1
1
-2
-7
4
34
11/04/2017
22/01/2018
12/11/2018
18/06/2019
07/10/2019
17/11/2021
16/06/2021
21/03/2022
21/11/2022
29/06/2020
24/02/2021
18/01/2022
-10
-7
-5
-4
-3
12
-1
2
2
17
34
34
25/01/2017
06/11/2017
19/06/2019
12/03/2021
-6
-6
0
3
20/05/2015
19/06/2017
12
31
07/05/2020
-2
21/02/2018
20/05/2019
26
32
18/01/2017
17/07/2017
20/08/2018
14/01/2019
03/05/2019
15/01/2020
10/02/2021
05/11/2024
12/04/2018
11/07/2019
29/06/2020
17/02/2021
05/07/2022
12/02/2025
-13
-14
-12
-12
-10
-10
-8
-4
13
17
22
28
23
38
01/06/2017
02/05/2018
28/01/2019
24
25
32
ISIN
POHBK
XS0785351213
XS0646202407
XS1076088001
XS1045726699
XS1144844583
XS0758309396
XS0540216669
XS0931144009
XS1077588017
XS1040272533
SAMBNK
XS0693226978
XS0834714254
XS0640463062
SBAB
XS1117542412
XS0968885623
SEB
XS0548881555
XS0894500981
XS0988357090
XS0614401197
XS0628653007
XS0730498143
XS0592695000
XS0972089568
XS0854425625
XS1033940740
SHBASS
XS0760243328
XS0906516256
XS1050552006
XS1135318431
XS0490111563
XS0732016596
XS0794225176
XS0965050197
XS0693812355
XS0819759571
SPABOL
XS0495145657
XS0820929437
XS0738895373
XS0995022661
XS0942804351
XS0587952085
XS0674396782
SPAROG
XS0853250271
XS0965489239
XS0876758664
XS1055536251
SWEDA
XS0496542787
XS0925525510
XS1069674825
XS0768453101
XS0740788699
XS1045283766
Coupon
Maturity
Mid Spd
1.625
3.500
0.750
1.500
1.000
2.625
3.000
1.250
1.125
2.000
23/05/2017
11/07/2018
11/06/2019
17/03/2021
28/11/2024
20/03/2017
08/09/2017
14/05/2018
17/06/2019
03/03/2021
-13
-12
-10
-6
-4
0
4
14
18
28
2.750
1.625
3.875
19/10/2016
27/09/2019
21/06/2021
-11
-8
-3
0.625
2.375
07/10/2021
04/09/2020
-3
35
2.625
1.500
1.625
4.125
3.750
3.875
4.250
2.000
1.875
2.000
16/10/2017
25/02/2020
04/11/2020
07/04/2021
19/05/2016
12/04/2017
21/02/2018
18/03/2019
14/11/2019
19/02/2021
-12
-5
-5
-2
-8
3
12
20
19
35
1.875
1.000
1.000
0.625
3.750
3.375
2.250
2.250
4.375
2.625
21/03/2017
19/06/2018
04/01/2019
10/11/2021
24/02/2017
17/07/2017
14/06/2018
27/08/2020
20/10/2021
23/08/2022
-14
-9
-7
-3
1
1
2
12
25
28
3.250
1.250
2.750
1.500
1.500
4.000
3.375
17/03/2017
28/02/2018
01/02/2019
20/01/2020
12/06/2020
03/02/2021
07/09/2021
-10
-8
-7
-3
-1
-3
-1
2.000
2.125
2.125
2.125
14/05/2018
27/02/2019
03/02/2020
14/04/2021
40
48
49
68
3.375
1.125
1.125
2.375
3.375
1.500
22/03/2017
07/05/2020
21/05/2021
04/04/2016
09/02/2017
18/03/2019
-14
-3
-3
-8
7
9
Source: Crédit Agricole CIB Trading, Bloomberg — See disclaimer on page 6
Page 5
Friday, 13 February 2015
Issue 114
Disclaimer
This material has been prepared by Crédit Agricole Corporate and Investment Bank or one of its affiliates (collectively “Crédit
Agricole CIB”). It does not constitute “investment research” as defined by the Financial Conduct Authority and is provided
for information purposes only. It is not to be construed as a solicitation or an offer to buy or sell any financial instruments and
has no regard to the specific investment objectives, financial situation or particular needs of any recipient. Crédit Agricole CIB
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