Sparkasse Pforzheim Calw is expected to issue a Eu250m mortgage covered bond in the coming days, which will be its largest Pfandbrief to date and first rated AAA, and an official at the issuer said that it hopes to reach new investors as it increases its Pfandbrief issuance.

Sparkasse Pforzheim Calw is the 11th largest savings bank in Germany, according to analysts at UniCredit. They noted that the volume of Sparkasse Pforzheim Calw’s outstanding Pfandbriefe has increased from Eu60m in the first quarter of 2011 to Eu393m as at 4 September 2015.

According to Dominik Hartmann-Springorum in Sparkasse Pforzheim Calw’s treasury, the savings bank has had the possibility of issuing mortgage Pfandbriefe since the end of 2008. He said that one of the reasons behind its covered bond issuance has been to reduce a dependency on the savings bank’s retail deposit business and to take advantage of the volume and maturity-matching available through Pfandbriefe.

“Another purpose is to reduce our refinancing costs,” he added. “And covered bonds are in our eyes the most suitable way to refinance our growing mortgage business.”

Hartmann-Springorum said the issuer is unable to print benchmark sized deals, as its cover pool is not sufficiently large, but noted that the new deal will be Sparkasse Pforzheim Calw’s largest covered bond issue.

He said the issuer is hoping to find new investors among banks, insurance companies, pension funds and building societies.

Sparkasse Pforzheim Calw appointed Fitch to rate its mortgage Pfandbriefe in March and Hartmann-Springorum said the rating will help investors open credit lines for the issuer and buy its covered bonds. He cited Liquidity Coverage Ratio requirements and Solvency II as being key drivers in the issuer’s decision to obtain the rating for its covered bonds.

Fitch assigned Sparkasse Pforzheim Calw’s mortgage Pfandbriefe the AAA rating on 25 September. The rating is the first assigned by Fitch to a German savings bank.

The rating agency said Sparkasse Pforzheim Calw’s rating of A+ – which reflects its membership of the Sparkassen-Finanzgruppe (SFG) mutual support group – and a two-notch IDR uplift result in a floor of AA for the Pfandbriefe rating on a tested probability of default basis. It also assigned the programme a D-Cap of four notches (moderate risk). An overcollateralisation of 100.3% taken into account allows for a two-notch recovery uplift and a AAA Pfandbrief rating, added Fitch.

The rating agency said Sparkasse Pforzheim Calw’s covered bonds are secured by 78% residential mortgages and roughly 16% commercial mortgage assets, with the remainder consisting of substitute assets in the form of debt issued by German federal states.

Fitch noted Sparkasse Pforzheim Calw’s operations are almost exclusively concentrated in the region of Pforzheim Calw in Baden-Württemberg.