Argenta Spaarbank is expected to launch an inaugural euro benchmark covered bond next week after today (Tuesday) announcing plans for a seven to 10 year Belgian mortgage Pandbrieven, making it the fifth issuer from a country that typically offers limited supply.

The bank has established a €7.5bn covered bond programme and gained formal National Bank of Belgium approval on Tuesday of last week (19 January).

Barclays, Belfius, LBBW and Natixis have been mandated to arrange virtual investor meetings commencing tomorrow (Wednesday), and a lead banker said the first issuance will likely follow next week, subject to market conditions.

“Next week feels more realistic in terms of allowing investors to set up lines and look at the programme,” he said, “as there’s no real rush to push it any earlier.”

The lead banker said the new issue will likely price close to where Argenta’s compatriots are trading.

“In this market, I would not expect to see a concession for it being an inaugural trade,” he added, “which has been a common theme in the past. There may be a marginal difference, however, given the issuer’s size and being less established, so a bit of a sweetener for investors for doing the groundwork.”

Argenta is the fifth largest bank in Belgium.

Its S&P rating of A- is at low end of those of its covered bond-issuing compatriots, but Maureen Schuller, head of financials sector strategy, ING, said issuer ratings and issuer sizes are not necessarily the most important explanatory factor in covered bond trading levels. She indicated a regular capital markets presence tends to help, noting that Argenta should benefit in this respect,

“Against this backdrop, it could be a supportive factor that Argenta Spaarbank is also a known Belgian issuer in the senior/subordinated space,” she said, “with the bank quoted just modestly wider than Belfius Bank in preferred senior. The spread difference is more substantial in bail-in senior though, where the bonds of Argenta Spaarbank are rated one notch lower at S&P than Belfius Bank comparables.”

The new covered bond issue, which has an expected rating of AAA from S&P, will be the first Belgian euro benchmark since KBC launched a sought-after €1bn five and a half year transaction in May 2020, and only three issues emerged from the country in 2020.

Argenta can be expected to issue one to two €500m deals a year from its new programme, said the lead banker. Its initial cover pool amounts to some €1.4bn.

Argenta will be the third issuer to launch an inaugural euro benchmark covered bond this year, following Komerční banka and KEB Hana Bank.

“At a time where primary activity by banks is dampened by the availability of cheap central bank funding, any new issuer entering the market makes a more than welcome change,” said Schuller.