Finland’s Sp Central Bank plans inaugural, senior bond

The Central Bank of Savings Banks Finland is planning an inaugural, senior unsecured bond in a move that will mark the reopening of wholesale funding for the Finnish Savings Banks Group.

The institution yesterday (Thursday) announced the mandate for a roadshow running from next Wednesday until 23 April, with Crédit Agricole CIB, LBBW and Nordea as leads. The deal will be the first off an MTN programme signed on Wednesday, while Standard & Poor’s on Tuesday assigned the institution an A- rating, on negative outlook.

The Central Bank of Savings Banks Finland (Sp Central Bank) is the central credit institution of the Finnish Savings Banks Group and the operational arm of Union Cooperative, which is responsible for the capital adequacy and liquidity of the group.

According to S&P, since December 2014 the group’s 25 member savings banks (Säästöpankki), Union Coop and Sp Central Bank have operated as a single entity for regulatory purposes under a joint and several guarantee scheme established by a Finnish Act of Amalgamation.

The Finnish Savings Banks previously raised wholesale funding via Aktia Real Estate Mortgage Bank covered bond issuance. However, in 2012 Aktia for a variety of reasons related to regulations and ratings decided to switch to direct issuance and the joint issuance arrangement ceased.

“The number one thing is of course to open up again wholesale funding channels for the group, which have not been there since Aktia Mortgage Bank was closed down,” said Kai Brander, head of treasury at Sp Central Bank.

“Furthermore, we have a need to widen our funding base, which is currently very concentrated in retail deposits.”

He said that such funding comprises around 85% of the group’s total funding, but that the plan is to reduce this share to around 70% by 2017.

“This does not mean that our deposit base will shrink – it will increase,” added Brander. “It is the projected growth of our balance sheet that explains why we will need more wholesale funding.”

The group is also planning to issue covered bonds in the future. It is working on setting up a mortgage bank that Brander said could issue its first covered bond in very late 2015, but is most likely to enter the market in early 2016.

“On the senior unsecured side, we have plans to issue one benchmark this year,” he said. “On top of that, on the covered side – and assuming we don’t issue anything this year – it will be roughly Eu1bn in 2016 and 2017.

“With this combination we believe that we can issue two to three times annually in either senior unsecured or covered to keep our name sufficiently known in the market.”

The Savings Banks Group has assets totalling some Eu8.4bn and in residential mortgages – its main business – a market share in Finland of around 4.8%.

See interview here for more information on Sp Central Bank and its plans.