Vakifbank is joining a growing line-up of Turkish banks that are turning to covered bonds, having on Friday announced that it obtained approval from its board for issuance of up to Eu1bn. An official at the bank said the bonds would be mortgage-backed.

The bank still has to apply to Turkey’s Capital Markets Board, according to the announcement, but an official at the issuer said that it has mandated two banks and is in the structuring phase.

The covered bonds would be mortgage-backed. Turkish covered bond issuance has hitherto been secured by SME loans, although Garanti Bank is also pursuing mortgage-backed issuance. In early July it announced that its board authorised up to Eu1bn of issuance, and if the timing of the Turkish banks’ announcements is anything to go by, Garanti Bank could be the first to launch a mortgage backed issue.

Vakifbank has authority to issue covered bond up to Eu1bn or its equivalent “in Turkish Lira or other currencies single or multi-tranche covered bonds to qualified investors within Turkey or abroad, in the form of private placement, in various maturities and fixed or floating interest rates which levels to be determined according to the market conditions at the time of issuances, to apply to Capital Markets Board and other relevant institutions”.