Bonum €100m debut the first step in POP plan

Bonum Bank issued its first public deal this week, a €100m three year FRN that will provide the basis for the future wholesale funding plans of the Finnish POP Bank Group, according to the issuer’s head of treasury, who said Bonum may target €250m issues in future.

Bonum Bank is the new central credit institution of the POP Bank Group, which also comprises 26 cooperative POP Banks, the POP Bank Alliance Coop, and online insurance company Finnish P&C Insurance Ltd. The POP Banks formed the Amalgamation of POP Banks on 31 December 2015, entering a joint and several guarantee scheme.

Aktia Bank had formerly acted as the central credit institution for the POP banks and Finland’s Savings Banks Group, but this relationship was terminated as of the beginning of 2015.

The new issue is Bonum Bank’s first public issue. Although the bank announced a €150m domestic CD programme earlier this year, this has not yet been used.

“We launched this deal because we want to enhance our funding source to support our member banks,” said Jukka Päärnilä, treasury manager at Bonum Bank. “This smaller issue will be the basis for our future wholesale funding plan for the group.”

Leads Danske and Nordea priced the €100m no-grow three year issue at 100bp over six month Euribor yesterday (Thursday), in the middle of initial guidance.

“We are quite happy with this deal,” said Päärnilä. “It was fully subscribed in less than two hours and it was reasonably oversubscribed in the end.

“We wanted to leave a little bit for investors, so we stuck with the 100bp margin. This was very successful.”

Asset managers were allocated 43% of the deal, insurance companies and pension funds 43%, central banks and official institutions 8%, and banks 6%.

Päärnilä added that the majority of the deal was allocated to Scandinavian accounts, but said some non-Nordic investors participated.

“It was a nice surprise to us that this deal was recognised outside Scandinavia, in continental Europe.

Bonum Bank was on 23 May assigned a rating of BBB by Standard & Poor’s, after it was on 6 April registered as a public limited company.

Päärnilä said the issuer opted to tap the market now as it was a favourable time to launch the deal, especially after the assignment of S&P’s rating.

He added that Bonum Bank is unlikely to issue benchmark €500m-sized deals in the near future, but said it could target smaller, Scandinavian benchmark-sized deals.

“Perhaps €250m issues will be the next target, but after a couple of years only,” he said.

Päärnilä also said that no decision had yet been made regarding whether the POP group will, through Bonum Bank, issue covered bonds.

“This is a project not yet started,” he said. “Bonum is ready to take on the responsibility, but it is the group’s decision.”