SpareBank 1 Boligkreditt Covered Bond Issuer
SpareBank 1 Boligkreditt is a Norwegian covered bond issuer jointly owned by the saving banks working closely together under the SpareBank 1 brand. The cover pool consists solely of Norwegian residential mortgages originated by the SpareBank 1 parent banks with a loan-to-value of up to maximum 75% and a liquidity reserve. The covered bonds are rated Aaa by Moody's.
The company's purpose is to acquire first lien Norwegian residential mortgages originated by the owner banks in the SpareBank 1 Alliance and finance these through issuing covered bonds.
Investors in SpareBank 1 Boligkreditt's covered bonds in NOK, EUR or USD enjoy the safety of one of the world's highest quality residential mortgage cover pools.
The entire SpareBank 1 Boligkreditt team with the Stavanger harbour in the background
The covered bond funding entity is of high strategic importance to the members in the SpareBank 1 Alliance. The Alliance consists of savings banks with a dominant share of mortgage retail lending as their core business. All of the business takes place within Norway and most SpareBank 1 banks trace their history to the 19th century. The Alliance's banking branch network is Norway's most extensive and the wide dispersion of banks ensures a well distributed cover pool.
As a specialised credit institution, SpareBank 1 Boligkreditt must fully comply with regulations applicable for all banks (including the existing and proposed Basel regulatory framework). The regulator in Norway is the Norwegian Financial Services Authority (Finanstilsynet).
SpareBank 1 Boligkreditt (ticker: Spabol) is established by the SpareBank 1 Alliance banks in August of 2005 in anticipation of the Norwegian Covered Bond legislation which is being drafted.
Work continues on the Covered Bond legislation.
The Norwegian covered bond legislation is passed by Parliament in June. In September SpareBank 1 Boligkreditt prices the inaugural EUR covered bond, effective October 1st, with a 3 year maturity for EUR 1.5 bn at a spread of 4 bps over mid-swaps.
The first NOK denominated covered bond issued in November, a floating rate, 2 year issue.
Spabol issues its second EUR benchmark in March 2008, a 3.25 year tenor with a spread over mid- swaps of 8 bps
Just a few days prior to the bankrupcty of Lehman Products Spabol issued a third EUR benchmark on September 10, 2008. The market clearing spread over mid-swaps had risen to 48bps for the inaugural 5 year tenor covered bond on the back of the hightened uncertainty in financial markets.
Boligkreditt continued to issue NOK denominated covered bonds in 2008 (three fixed rate bonds with maturities of up to 10 years), but in response to the market disruptions in the autumn of 2008 the Norwegian Government's Treasury offered banks long term funding which was to be collateralized with covered bonds. The Norwegian Government Covered Bond Swap Scheme (which was administered by the central bank) had an overall limit of NOK 330 bn of which Nok 229.5 bn was requested by the Norwegian banking sector, including SpareBank 1 Boligkreditt.
First Norwegian EUR benchmark covered bond from Spabol is issued in November, once more a three year maturity. The issue opens up the Norwegian market supply denominated in EUR post the 2008 disruptions and Government swap facility.
At the end of 2009 the nomnial value of outstanding covered bonds issued in the market stands at just over NOK 75 bn, of which NOK 18.1 bn had been placed with the central bank for long term funding under the swap scheme.
Two further benchmark covered bonds were issued in the EUR market (1.25 bn and 1 bn in March and June, respectively) while the Norwegian domestic market is also evolving.
In order to further diversify its funding sources, SpareBank 1 Boligkreditt commences work on an issuance programme which complies with the 144A rule for private placements in the U.S. The October issue marks the Company's inaugural U.S. covered bond, a 3 year USD 1 bn issue priced at 54 bps over the USD mid-swap level.
The nominal value of bonds issued stand at nearly NOK 96 bn (including bonds issued under the Government swap facility)
Covered Bonds outstanding grow by NOK 38.8 bn (41%) during the year as the Covered Bond issuer's grows in accordance with the plan. Spabol is at the end of the year financing approximately 36.5% of the overall volume of residential mortgages originated by its parents banks, the members of the SpareBank 1 Alliance.
Bonds are issued in all three of Spabol's currencies (NOK, EUR and USD) and a key theme is the extension of the outstanding curve in EUR with two 10-year bonds issued (February and September). The February issue is the first Norwegian 10 year covered bond denominated in EUR. With the turmoil in European capital markets building in the autumn, Spabol issues another EUR 1 bn benchmark in November, a sign of its safe haven status.
USD covered bonds from Spabol made a stronger mark in 2012 with two benchmarks issued (April and November of USD 1.25 bn each). The November issue was a 7 year maturity which becomes only the 2nd such tenor in the USD covered bond market. A further two EUR benchmarks were issued (February and August). Spreads for Spabol bonds are contracting markedly throughout the year alongside the broader market with the August EUR bond 5.5 year pricing at 17 bps over mid-swaps (compared to 63 bps for the 5 year in November 2011).
Overall, alongside a continued good development in terms of the size of the domestic market, Boligkreditt has financed approximately 41% of the overall volume of residential mortgages originated by its parent banks. The domestic market has evolved into a tap-market and funds 43% of all Spabol covered bonds outstanding (including the Government's swap facility). Overall, the nominal value of covered bonds issued stand at NOK 165.9 bn (23% y-o-y growth) and it is expected that the Company's initial stage of ramping up issuance volume by financing an increasing share of the parent banks' residential mortgages has been completed.
Lending to customers (mortgage loans on our balance sheet) grew by 9% over 2013, a significant decrease in the growth rate compared to 2012 (26%) and to previous years. This growth was reflected in the smaller volume of international benchmark covered bonds placed during the year, which was down to three issues (compared to four in both of the years 2011 and 2012). We placed USD 1 bn in April, and EUR 1 bn in June and November. The reasons for this development is that we one the one hand seen a flat development in the real estate market in Norway over 2013, but also it has been a good year for the parent banks to issue senior unsecured bonds. The SpareBank 1 banks have also seen financing sources from deposits increase.
Cover pool quality continue to be very good, with no losses and extremely low arrears.
SpareBank 1 Boligkreditt's Covered Bond Ratings:
Credit ratings for our parent banks
|Sr. Unsec. Ratings||Fitch||Moody’s|
|SpareBank 1 SMN||A- / F2||A1 / P-1|
|SpareBank 1 SR-Bank||A- / F2||A1 / P-1|
|SpareBank 1 Nord-Norge||A / F1||A1 / P-1|
|Sparebank 1 Ostlandet||n/a||A1 / P-1|