Equitable Bank is set to launch its first covered bond after the summer break, with a euro sub-benchmark expected, after Canada Mortgage & Housing Corporation (CMHC) yesterday added its programme to the Canadian covered bonds registry.

Equitable announced its intention to enter the covered bond market back in August 2019 and in February said it was hoping to debut in the second quarter.

Yesterday the bank said it had received approval from CMHC for its C$2bn legislative covered bond programme.

“We have had our sights set on launching this important funding programme, and are really pleased with the news of today’s approval,” said Equitable bank CFO Chadwick Westlake. “Covered bonds will be an important piece of our funding diversification plan going forward.

“This lever will enable us to continue to lower our cost of funds, as we bring innovative products to Canadians to drive change in banking to enrich people’s lives.”

Equitable will be the second new Canadian issuer this year – after Laurentian in late April debuted domestically with a C$250m five year deal – and 10th overall from the country. Unlike Laurentian, Equitable has said it is targeting the euro market, having previously flagged a €250m trade.

“With approval complete, we will be strategic about timing for each regular issuance,” Westlake said yesterday. “We look forward to our first issuance in Europe, which will make Equitable Bank the first Canadian mid-sized Schedule I Bank to do so, with timing expected to be by early fall this year.”

DZ Bank analysts said the size of Equitable’s programme and balance sheet – around C$31.3bn at the end of the first quarter – mean that sub-benchmarks rather than euro benchmarks are expected, with little room for growth of the programme, given a legislative limit of 5.5% for assets tied up in the programme versus total on-balance sheet assets. They noted that Equitable has committed not to go below overcollateralisation of 3.1% or above 25% for its covered bonds.

Barclays and TD Securities are arrangers of its programme.