DenizBank could become the next Turkish lender to issue covered bonds after having set up a programme for SME backed issuance, with Moody’s having yesterday (Tuesday) assigned a provisional A3 rating to bonds to be launched off the programme.

According to the rating agency, DenizBank will issue bonds under an SME backed covered bond programme of the Turkish lira equivalent of Eu300m. Moody’s assigned the programme a provisional A3 rating, three notches above DenizBank’s long term global local currency rating of Baa3.

DenizBank is a Turkish subsidiary of Russian lender Sberbank.

The International Finance Corporation (IFC), an international financial institution that is a member of the World Bank, is planning to purchase “up to Turkish lira 125m (Eu52.9m) covered bonds with a term of up to three years bullet to be issued by DenizBank”, according to an IFC proposal from 24 April.

A spokesperson at IFC declined to comment at this stage as the project has not yet been signed and The Covered Bond Report was unable to reach officials at DenizBank by the time of publication.

Two Turkish banks, Şekerbank and Yapi Kredi, have already issued SME backed covered bonds in the form of private placements, bought by a commercial bank and supranational institutions. They and other Turkish lenders, such as Garanti Bank, have expressed an interest in issuing covered bonds on the international markets, with Şekerbank having gone on a European roadshow in November.

Zeki Onder, executive vice-president, financial institutions and international funding at Şekerbank, told The CBR that the roadshow was carried out mainly to inform market participants about the structure of the programme, as this was the first SME-backed covered bond presented to the global market, and to collect feedback on the feasibility of an international issue. The bank also went on a roadshow for a potential senior unsecured dollar issue targeted for April, but ultimately held off issuing.

“We are now constantly watching the market to seize an opportunity to issue,” said Onder.

Akbank is also reportedly looking at the international covered bond market, although the bank declined to comment at this stage when contacted by The CBR.

There are two separate covered bond regulations in Turkey, one governing mortgage backed issuance and one for asset backed covered bonds. No mortgage covered bond has been issued by a Turkish bank, although Garanti Bank is exploring this option. (See here for previous coverage.)