Swedish Covered Bond Corporation parent SBAB Bank reported a trebling of deposit volumes in 2012, a move that the bank’s head of funding said would give it a better funding balance and reduce its dependency on wholesale funding.

Government-owned SBAB reported its results last Thursday (7 February), posting a 215% increase in deposits. Deposits soared from SEK8.8bn in 2011 to SEK27.7bn (Eu3.27bn) in 2012

Fredrik Jönsson, head of funding at SBAB Bank

Fredrik Jönsson, head of funding at SBAB Bank, said that increasing deposits was an “ambitious” goal that the bank managed to achieve.

He said that the bank managed to implement a funding strategy more focused on deposits to achieve a better funding balance.

“We currently offer a rate of 2.2%, which is high if compared with the half percent that is usually offered on the Swedish market,” said Jönsson.

He added that the increase in deposits allowed SBAB to diversify its funding base and to reduce its dependency on wholesale funding.

In November 2011 Moody’s downgraded SBAB from A1 to A2 in a move partly prompted by what it said was an almost total reliance on market funding. The rating agency at the time said that SBAB’s strategy of moving into retail savings products could be credit positive, but also challenging “in the context of the fierce competition between banks”.

Jönsson said that the decision to target an increase in deposits was not driven by Moody’s rating action and several factors contributed to it, including Basel III and a lack of competition in the saving area.

In terms of covered bonds, SBAB’s outstanding volume decreased slightly from SEK161bn in 2011 to SEK153bn in 2012 because of a higher amount of redemptions and buybacks relative to new issuance, he said.

Jönsson said that he expects issuance in 2013 to remain at similar levels than last year, as he forecasts deposits to grow further, although not as much as in 2012. SBAB issues covered bonds through subsidiary Swedish Covered Bond Corporation.