PSD Bank Nord is set to become the third member of Germany’s PSD group of cooperative banks to take up Pfandbriefe, with plans to issue covered bonds by the end of 2018, and could do so in conjunction with other members of the group, of which PSD Bank Rhein-Ruhr also plans to step up issuance.

The PSD group includes 14 regional cooperatives. In October 2015 PSD Bank Nürnberg became the first group member to issue Pfandbriefe and as of end-2016 had Eu15m of mortgage-backed Pfandbriefe outstanding.

PSD Bank Rhein-Ruhr was licenced in September last year and, according to analysts at DZ Bank, said in a recent investor presentation that it intends to extend its refinancing options with regular issues of mortgage Pfandbriefe.

PSD Bank Nord now hopes to issue its first Pfandbriefe by the end of next year, chief executive Stefan Kram told Börsen-Zeitung. A spokesperson for the bank confirmed the plans to The CBR, which include annual issuance volumes of up to Eu200m.

PSD Bank Nord is also discussing potential joint issuance with other group members. The pooling of collateral among members of various German banking groups to produce larger volumes has been discussed several times in the past.

“According to Börsen-Zeitung, large volume Pfandbrief issues are unlikely, even in cooperation with other PSD banks,” said DZ analysts. “PSD Bank Nord is using Pfandbriefe to extend its range of refinancing instruments, providing it with a diversification opportunity.

“The customer deposit business and refinancing within the cooperative financing group are currently important refinancing channels for PSD Bank Nord.”