Danske Bank is considering merging its Finnish subsidiary, which issues Finnish covered bonds, with its Helsinki branch in a move that its own analysts said could lead it to create a specialised mortgage bank in Finland, similar to a restructuring completed by Nordea in October.

Releasing its results last Thursday, the Danish bank said that, as part of efforts to simplify its organisation and improve efficiency, it is looking into the possibility of merging its activities in Finland – namely subsidiary Danske Bank plc and Finnish branch Danske Bank A/S, Helsinki branch – into a single branch.

“In doing so, we would achieve a uniform organisational structure across the Nordic markets,” said Danske. “The change would be primarily of a technical nature and would not change the way in which we serve our customers, nor would employees experience changes.

“As part of our preparations, we have initiated a dialogue with the authorities, and during 2017, we expect to take initiatives that may lead to branchification.”

Nordic rival Nordea established a specialised mortgage bank in Finland, Nordea Mortgage Bank, when converting its Finnish subsidiary, Nordea Bank Finland, into a branch in a restructuring completed in October and followed by an inaugural covered bond from the new entity in November. The move entailed the new issuer taking over the outstanding issuance of Nordea Bank Finland, with parent Nordea providing a guarantee in respect of outstanding issuance and a liquidity facility for the issuer, ensuring that the covered bonds’ triple-A rating was unchanged.

Danske analysts said yesterday (Tuesday) that a demerger of the covered bond business of Danske’s Finnish subsidiary (itself formerly Sampo Bank) and the establishment of a new specialised mortgage bank will presumably be required in Danske’s case, too, in order to preserve the status of outstanding issuance as covered bonds under Finnish law.

“As with Nordea prior to the demerger, covered bonds issued by Danske’s Finnish subsidiary are not guaranteed by any other entity in the group and the issuer could therefore opt to provide existing bondholders with a secondary guarantee,” they added.

“In any case, given a Finnish ‘branchification’, we would expect the credit strength of a potential new Finnish mortgage bank to be closely linked to the Danish parent bank. From that perspective, in this scenario, we would not expect any changes to the current triple-A rating from Moody’s, either on existing or future covered bond issues.”

Danske’s last Finnish benchmark covered bond was a Eu1bn five year in November 2015.