Deutsche Hypothekenbank (Deutsche Hypo) will be merged into parent NordLB in mid-2021, with the issuers’ mortgage and public sector cover pools being combined, as part of the restructuring of the German group that is also seeing its Luxembourg issuance cease.

The integration of the real estate subsidiary into Norddeutsche Landesbank (NordLB) was announced on 14 December.

“Deutsche Hypo is a profitable pillar in the NordLB Group,” said Reinhold Hilbers, Lower Saxony’s Finance Minister and chair of the supervisory board and the owners’ meeting of NordLB. “It is a renowned real estate financier and a reliable partner for its customers. Nothing will change in this respect. On the contrary: we will not only maintain the Deutsche Hypo brand, but strengthen it further.

“The full integration into NordLB will result in significant advantages on the cost side, in particular due to the merging of the respective staff and central divisions. This will also further improve the competitive position of the Deutsche Hypo brand.”

The merging of Deutsche Hypo into NordLB is expected to be completed on 30 June, after which NordLB will succeed Deutsche Hypo as issuer of any of the latter’s outstanding securities.

The issuers said the mortgage and public sector cover pools of Deutsche Hypo will be merged with those of NordLB by way of legal succession. The Pfandbriefe of both issuers are rated Aa1 by Moody’s.

Commerzbank analysts noted that the collateral metrics of the two banks’ cover pools differ noticeably, but do not expect the merging of the pools to have a significant impact on ratings, given they are all currently rated Aa1.

“Therefore, the rating risks for investors of both institutions and products appear to be low,” they said.

Deutsche Hypo has issued two green Pfandbriefe and the issuers said that as well as NordLB taking these on, the group’s green bond strategy is being further developed as part of the transformation of NordLB, which has not itself yet issued green Pfandbriefe.

The move comes after NordLB in late November announced that NordLB Luxembourg Covered Bond Bank (CBB) will discontinue its covered bond business from next year, including its unique renewable energy issuance.