Norway’s SpareBank 1 SR-Bank is planning a debut, domestic covered bond through new 100% subsidiary SR-Boligkreditt later this month or early June ahead of potential international issuance, as it shifts away from SpareBank 1 Boligkreditt to optimise funding and for regulatory reasons.

As reported in October, large exposures regulations could constrain savings banks that have previously funded themselves jointly via SpareBank 1 Boligkreditt (SpaBol) from doing so in future. SR-Bank is the largest shareholder in SpaBol, with a 20.4% stake as of 30 June 2014 (according to a March 2015 SpaBol investor presentation).

SR-Bank said in a presentation accompanying its first quarter results on 28 April that the purpose of the new covered bond company is to optimise its funding mix and eliminate possible limitations due to regulatory limits on large exposures.

According to Dag Hjelle, head of treasury at SpareBank 1 SR-Bank, the bank hopes to issue an inaugural covered bond in late May or at the beginning of June, with the debut issue being a domestic benchmark of some Nkr4bn (Eu476m). The bank plans to build a curve in Norwegian kroner, raising around Nkr8bn per year from this year to 2017. It will be open to private placements immediately, also in foreign currencies.

Hjelle said that since news of its new covered bond plans emerged in the autumn the topic has arisen at meetings it has held with investors on other matters.

“We have asked them if they would be interested,” he added, “and we have had very good interest, also from abroad.”

Moody’s assigned a provisional Aaa rating to SR-Boligkreditt covered bonds yesterday (Monday). The issuer is unrated, while SR-Bank is rated A1/A- by Moody’s and Fitch, after having been upgraded from A2 by Moody’s yesterday.

Regarding whether SR-Bank will continue to raise funding via SpaBol, Hjelle said: “We will probably use SR-Boligkreditt at the beginning to get it up and running and reach critical mass.”