Crédit Agricole next bank (CAnb), a Swiss subsidiary of the French group, sold the first covered bond off a new contractual programme on Wednesday, a CHF200m nine year deal that was almost twice oversubscribed and priced flat to Credit Suisse’s domestic issuance.

The CHF200m (€186m) deal was launched off a CHF2bn programme for Crédit Agricole next bank (Suisse) SA, guaranteed by CAnb (Suisse) Hypothèques SA, that was arranged by Credit Suisse and completed last week.

CAnb’s programme is the third current contractual programme in Switzerland following similar issuance from Valiant and Credit Suisse, and after earlier programmes of Credit Suisse and UBS – which included non-domestically domiciled features – were discontinued. Swiss legislative issuance is confined to the two joint issuers Pfandbriefzentrale der schweizerischen Kantonalbanken and Pfandbriefbank schweizerischer Hypothekarinstitute.

According to Isabel Faragalli, head of securitisation and covered bond structuring, Switzerland, at Credit Suisse, CAnb’s structure is very similar to that of Credit Suisse, which was inaugurated in June 2019, although more streamlined, with Credit Suisse’s having been adapted from its prior international programme.

The new issue, which is triple-A rated by Fitch, was launched on Wednesday after an investor call on Tuesday. The CHF200m nine year deal was almost two times oversubscribed, allowing CAnb to achieve its maximum targeted size, and priced at a yield of 0.07% and mid-swaps plus 35bp, flat to where Credit Suisse issuance was trading.

“This was a very successful start for Crédit Agricole next bank,” said Dominique Kunz, head of Swiss debt capital markets at Credit Suisse, which also led the new issue. “It all came together nicely, in terms of announcing the transaction last week, collecting investor feedback, then having the investor call on Tuesday, which was well attended, and then bookbuilding on Wednesday morning.

“And we achieved the objective of pricing flat to Credit Suisse, which is an established domestic covered bond set-up with a very similar methodology.”

With a relatively modest deposit base in Switzerland, CAnb has previously used Pfandbriefbank, intra-group and RMBS funding, and the covered bond programme is expected to help the issuer continue to aggressively grow its mortgage portfolio while reducing the need for intra-group funding. Faragalli noted that CAnb’s prior experience of RMBS issuance contributed to the programme being established quickly, in the space of just around three months.

Following CAnb’s inaugural deal, other Swiss banks could establish similar programmes, according to Kunz.

“For the various reasons that Valiant, Credit Suisse and now next bank found it attractive to set up a programme, we expect others will,” he said. “For Credit Suisse, we can raise secured funding in size for the Swiss unit, while for banks who don’t have large deposit bases and are reliant on wholesale funding, triple-A covered bonds provide a more resilient source of funding than senior unsecured, for example. Then there may be other subsidiaries of foreign groups who want to diversify away from intra-group loans and have a local source of financing.

“And the eligibility criteria of the rating agencies are not exactly the same as those of the Pfandbriefbank,” he added, “and so there are mortgages which can be used to issue covered bonds that would not be eligible for Pfandbriefbank funding. So there are many reasons a bank would look at something like this.”