TBK now Eika, profits up 240%

Apr 4th, 2013

Eika Boligkreditt, formerly known as Terra BoligKreditt (TBK), posted a 240% rise in pre-tax profit in 2012 following an increase in lending activities and in margins on lending, according to an official at the Norwegian issuer.

Anders Mathisen
senior vice president at Eika Boligkreditt

Eika Boligkreditt issues covered bonds for 79 banks that are part of the Eika Alliance. It reported its annual results on 22 March and posted pre-tax profits of Nkr112m (Eu15m) in 2012, up from Nkr33m in 2011.

With the presentation of its annual results, the Norwegian issuer also changed its name from Terra BoligKreditt to Eika Boligkreditt.

Anders Mathisen, senior vice president at Eika Boligkreditt, said that the adoption of the new name followed the renaming of the bank alliance and financial group to Eika.

“The change of name is not the result of any restructuring, but simply the natural consequence of the group decision to adopt a new name,” he said.

Eika is Norwegian for oak tree, the symbol used in the logos of most of the banks in the Alliance, said Mathisen. It was the original name of the banking alliance, according to the issuer.

Mathisen told Nordic FIs & Covered that the increase in profits was driven by a Nkr9.9bn growth in the lending activities of the Eika Alliance member banks, which resulted in a 26.6% increase in Eika Boligkreditt’s mortgage portfolio to Nkr47.1bn.

Also contributing to the profit growth was a more than 1 percentage point decline in the Norwegian Interbank Offered Rate (Nibor).

“The fall of Nibor from 3% to below 2% meant reduced funding costs, and that the margins on lending increased significantly resulting in higher profits for the year,” he said.

In May 2012 Eika Boligkreditt (then Terra BoligKreditt) was demerged from the Eika Gruppen (formerly Terra Gruppen), the financial services group that provides services for the Eika Alliance. According to Mathisen, the demerger had little impact on Eika Boligkreditt’s results, but had positive implications in terms of the rating for Eika Boligkreditt, as the members of the alliance are as a result providing liquidity and capital support directly to the issuer rather than the holding company in the group.

Eika Boligkreditt issued Nkr23.3bn of secured and unsecured debt in 2012, of which Nkr21.4bn was in covered bonds.

“Eika Boligkreditt is mainly focused on covered bonds,” said Mathisen. “We use senior unsecured issuance mainly to fund overcollateralisation.”

In November Eika launched its first jumbo benchmark, a Eu1bn five year issue that attracted more than Eu2bn of orders.

The deal was followed by a Eu1bn 10 year issue on 23 January that was its first benchmark in the long maturity.

Mathisen said that Eika Boligkreditt aims to issue at least two benchmarks per year, so it is likely that the issuer will launch another euro covered bond deal in 2013.

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