Wüstenrot Bausparkasse could become the first German building society to issue Pfandbriefe, as it assumes control of the covered bond business of Wüstenrot Bank Pfandbriefbank, while the unrelated Bausparkasse Wüstenrot has become the first Austrian building society to have its covered bonds rated, by Scope.

Germany’s Wüstenrot Bausparkasse is taking over the Pfandbrief business of sister institution Wüstenrot Bank Pfandbriefbank, according to analysts at Commerzbank, with the latter being converted into a digital bank for retail customers. In August it surrendered its license to issue public sector Pfandbriefe, after its last issue was repaid.

According to the analysts, the Wüstenrot & Württembergische (W&W) group announced on 31 March that the remaining mortgage cover pool will be transferred to Wüstenrot Bausparkasse. They said the reorganisation of the W&W group could stimulate its Pfandbrief business, as Wüstenrot Bausparkasse forecasts a significant increase in its mortgage business in 2017.

The mortgage covered bonds of Austria’s Bausparkasse Wüstenrot were meanwhile last Thursday assigned a AA+ rating with stable outlook by Scope. According to the rating agency, the rating is the first assigned to the Pfandbriefe of an Austrian Bausparkasse, while it is Scope’s first solicited covered bond rating in Austria and fourth solicited covered bond rating overall.

The rating is based on a private rating of the bank and, Scope said, enhanced by fundamental credit support factors, which provides four notches above the issuer rating, and an analysis of the cover pool, which provides an additional three notches, allowing for a total of seven notches above the issuer rating.

Under Scope’s methodology, covered bonds can be rated a maximum of nine notches above the issuer rating – two notches based on its analysis of legal frameworks and up to a further four notches based on an analysis of the resolution regime and the covered bonds’ systemic importance, and then up to three extra notches based on an issuer-specific cover pool analysis.

Bausparkasse Wüstenrot’s covered bonds qualify for just two notches of uplift based on the analysis of the resolution regime. Under Scope’s methodology, Austrian covered bonds can benefit from only three of the maximum four notches relating to the resolution regime.

Wüstenrot, the only independent Bausparkasse in Austria, has to date issued just one retained covered bond since receiving a license for issuance in December 2013, and is building up its cover pool, according to Scope. As of December 2016, its cover pool totalled Eu254m, with Eu2m covered bonds outstanding.

Despite sharing near identical names, the Austrian and German institutions are unrelated, although both arose out of the same cooperative banking movement early last century.

Photo: Bausparkasse Wüstenrot