SNS Bank felt it had to demonstrate its access to the public debt markets when launching a long delayed Eu1bn five year covered bond yesterday (Thursday) and was therefore pleased to have been able to finally do so, an official at the issuer told The Covered Bond Report.

After building a book of Eu1.55bn comprising some 165 accounts, leads DZ Bank, Natixis, Rabobank, RBS and UniCredit priced the August 2017 benchmark at 115bp over mid-swaps, in line with guidance and initial price thoughts of the 115bp area.

SNS had originally announced the mandate for a new covered bond back in December 2011 and then approached the market in January before deciding to hold off, with execution too difficult. Yesterday’s deal came after SNS announced results on Thursday of last week (16 August).

“The retail bank had good results, the insurance operations had good results, but we have our property problems within a certain department of the organisation, and that is also the reason why we are rated where we are at the moment,” Bart Toering, managing director, SNS Financial Markets, told The Covered Bond Report. “But nevertheless we thought now was the right time to move ahead, because markets were reasonably good.

“The preparations were already done because we had worked on this project before, in January, too, when we postponed it because of market circumstances, which was not really ideal. We also saw transactions like UniCredit, for instance, on the covered bond side, which does not have triple-A/triple-A ratings anymore. So that gave us a little more comfort that we could go ahead.”

Toering said that SNS was keen to show itself in the public debt markets.

“We also needed to do something” he said. “Our liquidity position is huge, but we had to do something anyway in term money in order to show the market that we are able to finance ourselves externally, and that’s what we did, so we are very pleased with that.

“Of course, we do pay more spread than the INGs and the ABNs of this world, but that’s also a reflection of the rating of the underlying issuer and also the rating of the covered bonds.”

The pricing of 115bp over mid-swaps for SNS’s Aa2/AAA rated covered bond compared with 43bp over for ING Bank’s Eu2bn eight year triple-A issue priced on Monday.

According to provisional figures, German and Austrian accounts were allocated 45% of the issue, the UK 18%, France 13%, Switzerland 8%, the Benelux 4%, Nordics 7%, southern Europe 2%, and others 3%. Banks took 45%, central banks 3%, fund managers 48%, and insurance companies and pension funds 4%.

“What was surprising was the participation of the Dutch investor base, which was disappointing,” said Toering. “Germany, the UK, France, Switzerland were all good.

“And I must say that the number of smaller accounts which came into the book, I’ve never seen anything like that before. 160 accounts – that’s enormous – and the book of a little more than Eu1.5bn was better than I expected.”

A market participant suggested yesterday that SNS had also been considering an RMBS transaction as a possible alternative to the covered bond issue, but Toering said that it is still preparing an RMBS issue and that it is a separate project.

“The RMBS market is a different animal,” he said. “The RMBS market is something we certainly do not want to move away from, but the point with that is that getting the swap counterparties lined up is getting more and more difficult, and there we are trying to think of new structures in order to bring that to the market again.

“But that remains important, too. In the Netherlands we have a system whereby you are limited by an issuance ceiling given by the Dutch central bank so that you cannot fill up on covered bonds up to your eyeballs. And also for diversification reasons you want to try to do more than just covered bonds.”