Deutsche Bank in Italy has set up a mortgage covered bond programme under the country’s obbligazioni bancarie garantite (OBG) framework, giving the group another covered bond funding platform on top of German Pfandbriefe and cédulas.

Deutsche Bank Milan headquarters

Deutsche Bank SpA has launched some Eu2.9m of covered bonds off the programme, according to Moody’s, which on Friday assigned a definitive A2 rating, on review for downgrade, to the OBGs.

The issuer is privately rated by Moody’s, with the rating agency estimating cover pool losses in the event of an issuer default to amount to 22%.

A portfolio of residential mortgage loans was sold to the guarantor, DB Covered Bond Ltd, on 22 June, according to a statement from Deutsche Bank SpA.

Moody’s based its analysis on data as of 31 May, and said that the total value of cover pool assets as of this date was around Eu3,468.9m, comprising 42,607 residential mortgage loans and substitute assets.

The residential mortgage loans have a weighted-average seasoning of 28 months and a weighted-average loan-to-value ratio of 54.7%, according to Moody’s.

The rating agency said that total overcollateralisation (OC) in the OBG programme amounts to 19.6%, of which 7.5% is provided on what it considers to be a committed basis. The OC level consistent with an A2 rating is 0%, it said. The Timely Payment Indicator (TPI) assigned to this transaction is “Improbable”.

This does not constrain the covered bonds’ rating, which is rather constrained by a country ceiling for covered bonds of A2.

The Deutsche Bank group already has two covered bond issuers, with Deutsche Bank SAE issuing cédulas hipotecarias under the Spanish framework and Deutsche Bank itself selling German Pfandbriefe, the latter being the only covered bonds issued in benchmark format. (See here for related coverage.) Deutsche Bank also owns 93.7% of Deutsche Postbank, which issues benchmark covered bonds.