Sweden’s Sparbanken Skåne intends to issue its first covered bonds this year, having established and received regulatory approval for a new, Skr30bn programme, as it brings back mortgages onto its balance sheet from Swedbank and increases its share of its local market.

The regional savings bank announced yesterday (Tuesday) that it had established the programme and published a prospectus. This comes after the bank filed an application to Swedish Financial Supervisory Authority (Finansinspektionen) for authorisation to issue covered bonds in October 2016 and received approval this March.

Sparbanken Skåne said the programme allows it to issue covered bonds in Swedish kronor with a maturity of at least one year and with a maximum outstanding nominal amount of Skr30bn (Eu3.1bn). It plans to issue its first covered bond in 2017.

Sparbanken Skåne said the ability to issue Swedish covered bonds (säkerställda obligationer) would allow the bank to increase its presence in capital markets and diversify its funding sources, and is part of its efforts to strengthen its position in the mortgage market of the Skåne region, with CEO Bo Bengtsson describing the move as “very positive”.

The bank is mainly funded by deposits, but has accessed long term wholesale funding via an MTN programme. As of end-March 2017, it had Skr6.7bn of bonds outstanding.

Sparbanken Skåne was formed in 2014 by a merger of Sparbanken 1826, Färs & Frosta and part of Sparbanken Öresund, and is the largest savings bank in Sweden.

It is owned by three savings banks and Swedbank and, like other Swedish savings banks, cooperates closely with Swedbank, including “upstreaming” mortgages to the larger issuer.

However, it has been transferring residential mortgages back from Swedbank to its own portfolio.

According to S&P, the bank aims to increase its share of the local mortgage market from over 40% currently to 50% in the coming years, by retaining a larger share of new lending on its own balance sheet.

As of 31 March, Sparbanken Skåne had Skr52.8bn of loans to the general public on its balance sheet and Skr27.9bn of loans brokered to Swedbank Hypotek. The volume of loans brokered to Swedbank fell from Skr28.9bn as of end-2016 and Skr36.277bn as of end-2015.

Sparbanken Skåne is rated A- on negative outlook by S&P, after having been upgraded from BBB+ in December.

Danske is expected to issue a debut Swedish krona benchmark in the autumn, through recently-established subsidiary Danske Hypotek, which received permission to start mortgage lending and covered bond issuance from Finansinspektionen in June.