Oberbank is preparing its first public covered bond issuance and could debut next year, according to its deputy head of global financial markets, who cited the benefits of the funding tool in hard times, after Oberbank received its first covered bond rating this week.

Oberbank has previously issued covered bonds only through private placements, but Robert Musner, deputy head of global financial markets at Oberbank, told The Covered Bond Report that the issuer is now preparing to publicly issue sub-benchmarks, having received a AAA rating for its mortgage-backed programme from S&P on Monday.

“We do not expect the first public issue to be this year, because we are very liquid and don’t really need to issue yet, so we are not in a hurry,” he said. “We want to give ourselves the option, to wait and see how we can use the liquidity and whether there will be enough growth in our loan portfolio.

“However, we may start as soon as next year. We will be in a position to issue Eu250m volumes occasionally – not regularly – as the cover pool is not so big, but we plan to return to the market from time to time.”

As of the end of February, Oberbank had Eu199m of mortgage covered bonds outstanding, and its mortgage cover pool totalled Eu727.7m.

Musner said Oberbank wants to have the option of issuing covered bonds because they are a useful funding tool when market conditions become more challenging, and said it is targeting larger, public deals as these are more attractive to bank treasuries and other investors.

Oberbank’s mortgage collateral is exclusively Austrian and euro-denominated, and comprised 86% of residential mortgages and 14% of commercial mortgages.

Musner said the issuer might in future add German residential and commercial mortgages to the cover pool, to a limited extent. Oberbank has branches in Germany, as well as Hungary, the Czech Republic and Slovakia.

Oberbank also has an unrated public sector covered bond programme, but Musner noted that it has not used this programme for many years and has only a very small amount outstanding. He said the bank currently has no plans to issue new public sector covered bonds.

Photo: Oberbank’s headquarters in Linz; Copyright: Dietmar Tollerian