Deutsche Bank has been working on a new structured conditional pass-through (CPT) covered bond programme potentially including residential and commercial mortgages of itself and two subsidiaries. It was assigned a provisional AAA rating by DBRS today (Tuesday).

According to the rating agency, up to four inaugural series totalling Eu8.5bn, with a weighted average life of three years, are expected off the programme, which has an overall size of Eu35bn.

The issuance is guaranteed by special purpose vehicle SCB Alpspitze UG, with payments under the guarantee secured over a pool of mortgage loans transferred by Deutsche Bank, Deutsche Bank Privat- und Geschäftskunden AG and Deutsche Bank Bauspar AG – the latter two are subsidiaries of Deutsche Bank.

As of September 2016, the cover pool, totalling Eu11.47bn, comprised only retail mortgages and home loans. However, DBRS said Deutsche expects to include some commercial real estate (CRE) loans, and assumed a cover pool split of 93% retail loans/7% CRE in some of its stressing, with around 70% of the CRE pool denominated in sterling.

DBRS’s rating is based on an expected 16% level of contractually committed overcollateralisation (OC) on a nominal basis, while the level of OC expected to be available upon inaugural issuance is approximately 35%.

In a deviation from DBRS’s methodology, the covered bonds attachment point (CBAP) of the programme, at A, is one notch below the Critical Obligations Rating (COR) of Deutsche.

The rating agency said there is a “not negligible” risk that the covered bonds are not classified as secured liabilities of the issuer in the event of resolution under the new EU regulatory framework.

Deutsche Bank already issues mortgage Pfandbriefe, while its Spanish subsidiary, Deutsche Bank SAE, issues cédulas. Its last German benchmark was a Eu500m 12 year deal at 7bp through mid-swaps on 24 August.

The new programme is outside the scope of Germany’s Pfandbrief Act. The only benchmark structured covered bond issuance from Germany has been off a Commerzbank SME-backed programme, which also has a CPT structure.

The rating is the first by DBRS of a German covered bond programme. It published a first Legal & Structuring Framework (LSF) assessment for Germany in April as part of a bid to expand its coverage into central and northern Europe.