MünchenerHyp hopes to return with further Ecological ESG Pfandbriefe annually after yesterday (Tuesday) launching an inaugural green bond that attracted even stronger demand than expected, according to its head of debt IR, although plans for social bonds may take some time to come to fruition.

Münchener Hypothekenbank’s EUR500m long five year issue attracted more than EUR900m of demand from 80 investors in 14 countries, with 40% going to what the leads characterised as green accounts.

Claudia Bärdges-Koch, head of debt investor relations and client acquisition at MünchenerHyp (pictured), said the number of accounts was above expectations and more than anyone at the bank could recall for a EUR500m benchmark.

“We had a lot of completely new names where I even had to ask, sorry, is that a bank or an asset manager?” she told The CBR. “Allocations were tough as more or less everyone was complaining that they didn’t get more, although we always try our best to keep everyone happy.”

Bärdges-Koch noted that the proportion of SRI investors, at 40%, is higher than the 32% share in its first ESG Pfandbrief, a smaller, EUR300m five year deal in September 2014 where cooperative housing loans were the eligible assets.

“That the green part is bigger is a nice development for the market,” she added.

Banks were allocated 44.0%, asset managers and funds 37.4%, central banks/official institutions and sub-sovereigns 14.4%, and insurance companies 4.2%. Germany took 62.9%, Nordics 14.6%, the UK 8.9%, Benelux 5.0%, France 3.6%, the Middle East and Asia 3.5%, and other Europe 1.5%.

Leads ABN Amro, DZ and HSBC opened books on the EUR500m no-grow long five year deal yesterday morning, having teed up the trade the previous day, following the completion of the roadshow last Thursday.

Bärdges-Koch said that KfW announcing a five year euro benchmark for the same day gave MünchenerHyp pause for thought, but the issuer decided that – particularly with the agency not issuing in green format – the transactions were sufficiently distinct for the concurrent supply not to be a problem, with MünchenerHyp also offering some 13bp more than KfW based on initial guidance.

Following guidance of mid-swaps minus 6bp, the deal was priced at minus 8bp. Bärdges-Koch said that pricing tighter than minus 8bp may have been possible, but would not have been consistent with MünchenerHyp’s approach.

“There was a bit of discussion, but we just said, look, our investors are used to us not going to the extreme – we don’t push the price by 3bp, but rather leave another basis point of secondary market performance to our investors,” she said. “That was why we said we started at minus 6bp with a target of minus 8bp, so it was exactly the price we were hoping to get.”

Bärdges-Koch said a key point for investors was the way in which MünchenerHyp has introduced a green retail mortgage that features a discount for borrowers – and also a discounted loan for families.

“Particularly the new and ‘dark green’ investors, they were very convinced by the fact that we have implemented our own products, both on the green and social side, and that this is hence part of our core business,” she said. “We offer green loans every day on a permanent basis and our green portfolio is already beyond EUR1.1bn – we did not just put together some assets for the sake of this bond.”

MünchenerHyp is now likely to sell one Ecological issue per year, according to Bärdges-Koch, with the pace dependent on growth in its green retail lending. The eligible assets currently include some 1600 retail loans, versus 14 commercial mortgages, and she said the bank is keen to maintain a high proportion of the granular retail loans for its Ecological issues.

The bank is also planning on issuing Social ESG Pfandbriefe, but – as with the Ecological issuance – the timing will depend on the development of the respective assets, in this case a Family Loan that MünchenerHyp only launched this January. The Ecological issue came almost three years after its Green Loan was launched.

“We have to be realistic,” said Bärdges-Koch, “it will take some time.”

MünchenerHyp’s first ESG Pfandbrief, a EUR300m deal in September 2014 taking in cooperative housing loans, matures in September next year, but Bärdges-Koch said that the issuer will not simply roll over the assets into a new social bond but add social family loans.