Moody’s published a credit assessment of Finland’s legal framework for covered bonds on Tuesday, highlighting several strengths of the country’s market, but citing weaknesses with respect to cover pool monitors and to covered bondholders’ rights over certain overcollateralisation.
Moody’s affirmed Aktia Bank at A3 yesterday (Wednesday), but revised the outlook from stable to negative, a move that an Aktia official said was to be expected given that the bank will no longer be the central credit institution for the POP and savings banks in Finland.
Strong increases in deposit volumes were highlights of full year 2012 results reported by Sweden’s SBAB Bank and Länsförsäkringar Bank last week, with SBAB trebling deposits year-on-year and moving towards its goal of achieving a more balanced funding mix.
The outlook for the Finnish banking system remains negative, said Moody’s yesterday (Wednesday), citing as driving factors its expectations of a continued weak operating environment, increasing household indebtedness, and high reliance on wholesale funding in the context of prevailing capital markets volatility.
Nordea Bank Finland placed the first Nordic benchmark covered bond of 2013 on Tuesday, a Eu1.25bn seven year deal that came inside the issuer’s curve after being twice subscribed, with the tight pricing seen as justified by strong technicals and a robust market.
Aktia Bank sold a Eu200m three year floating rate note today (Thursday), making a rare appearance in senior unsecured format while it makes the transition from issuing covered bonds via Aktia Real Estate Mortgage Bank to issuing directly.
A Finnish Ministry of Finance working group has proposed allowing the country’s financial supervisory authority to cap LTV ratios, a move that an official at a Finnish issuer and analysts said would be positive for covered bond investors.
Timo Ruotsalainen, Aktia Real Estate Mortgage Bank managing director, said that a Moody’s downgrade of the issuer’s covered bonds from Aa1 to Aa3 last Friday, which was less harsh than had been expected, was a pleasant surprise and that any decision on a potential liability management exercise was now less pressing.
The possibility of Aktia Bank launching a liability management exercise offering investors the option to switch into its covered bonds once it begins issuing directly next year has been raised by Aktia Real Estate Mortgage Bank, while some market participants have said that the Finnish group’s erstwhile partners could issue on their own.
Danske subsidiary Sampo Bank is pricing its first benchmark covered bond of the year today (Thursday), a Eu1bn no-grow seven year issue that offered a premium over top tier Finnish names but came tight to the issuer’s curve, said a lead syndicate official, after some others saw a wider new issue premium.