After Sumitomo Mitsui Banking Corporation (SMBC) launched the first Japanese covered bond yesterday (Tuesday), Atsushi Ouchiyama, senior vice president, debt strategy and issuance group, treasury unit, SMBC, shared the issuer’s experience of the roadshow and execution with The CBR.

See here for yesterday’s deal coverage.

What kind of a reception did you get from investors regarding your plans, structure and credit story on the roadshow?

Atsushi Ouchiyama, SMBC: The reception we got from investors was overall warm, and we had meetings with around 60 investors in seven days!

During the roadshow, we explained: firstly, SMBC’s solid credit story; secondly, the stable and large housing market of $1.6tn mortgages outstanding, with a delinquency ratio of less than 1%; and thirdly, the attractive structure of the SMBC covered bond programme, with 25% OC with only triple-A self-originated RMBS. And we believe our story was well understood by the investor base.

What we emphasised most is the programme’s uniqueness from an investor point of view, in that they can gain exposure to a triple-A product out of Japan, which is hard to find in the market because even government-guaranteed product is rated single A.

Also, we emphasised that our ultimate goal is to diversify the investor base for SMBC and become a frequent issuer off this programme, which is shown by its size of EUR20bn.

How do you feel the transaction went? How did it compare with your hopes and expectations regarding demand and pricing?

Ouchiyama, SMBC: I feel the transaction went exceptionally well thanks to a well-prepared marketing effort by all those involved in the transaction. The demand and pricing were right in the middle of our expectations.

Our priority was to diversify the investor base, so price was not our first priority for the inaugural transaction.

Are there any other aspects to the transaction that you consider particularly interesting or surprising?

Ouchiyama, SMBC: We saw traditional bank treasuries participated in our book even with uncertainty regarding the LCR treatment of our covered bond programme.

Many central banks and official institutions – some of whom we have never seen in the book for senior unsecured bond offerings – also participated.

How do you the potential for Japanese covered bond issuance in light of this debut SMBC transaction?

Ouchiyama, SMBC: Given the size of the mortgage market, $1.6tn equivalent, and the huge benefit to Japanese banks of having a stable and solid foreign currency funding tool, there is no reason not to explore the covered bond market.