Positive feedback from a two week roadshow and confidence in the quality of its offering allowed ING-DiBa to yesterday (Wednesday) proceed “relatively optimistically” with a debut, mortgage Pfandbrief despite tricky market conditions, funding officials at the issuer told The Covered Bond Report.

The German bank, a wholly owned subsidiary of the Netherlands’ ING Group, was granted a Pfandbrief licence by BaFin, the German financial supervisory authority, in 2010 and had by the end of this May established a Eu10bn programme. A two week roadshow ensued, which finished last week.

“It was always our intention to come to market after that,” Frank Parensen, senior treasurer, liquidity and funding at ING-DiBa, told The Covered Bond Report, “but given the uncertainty about the vote of confidence in Greece on Tuesday night we felt that it wouldn’t have been opportune to launch a deal before that had been positively resolved.”

But the issuer decided that it would be worthwhile checking if market conditions on Wednesday had improved sufficiently to warrant launching a deal, and was encouraged by what it saw.

“We had a good feeling there was a window that we could use, and approached it relatively optimistically,” said Parensen. “And we were not disappointed. The window that we saw worked well for us.”

Leads Commerzbank, HSBC, ING and UniCredit priced a Eu500m five year no-grow mortgage Pfandbrief at 14bp over mid-swaps yesterday afternoon after having gathered slightly more than Eu1bn of orders in around one hour. The guidance had been set at the 15bp over mid-swaps area, which in turn followed a whisper of the mid to high teens that served as the basis for gathering indications of interest earlier in the morning.

The re-offer spread of 14bp over mid-swaps incorporated a new issue premium of “a couple of basis points”, according to Parensen.

Around 60 accounts participated in the transaction, with funds taking 44%, banks 35%, insurance and pension funds 11%, central banks 4%, retail 4% and corporates 2%. Germany was allocated 79% of the bonds, the Benelux 6%, other Europe 5%, the Nordic area 4%, France 3%, and Austria and Switzerland 3%.

Roadshow worth the effort

Dieter Schreiner, head of liquidity and funding at ING-DiBa, said that the issuer was very satisfied with yesterday’s transaction.

“As an inaugural issuer we managed to find a good window amid market conditions that admittedly were not very easy, which reflects the high quality of ING-DiBa as an issuer and that of the cover pool,” he said. “On that basis we were able to use the window that presented itself to very good effect, both in terms of the pricing and the level of demand.”

He highlighted as a particularly pleasing aspect of the transaction the high hit rate generated by the roadshow.

“A lot of investors from the roadshow participated in the transaction,” he said.

The size of yesterday’s issue was capped at Eu500m from the outset given that the cover pool backing the Pfandbriefe stands at around Eu630m, but Schreiner said that the issuer is open to offering larger, jumbo transactions.

“We intend to launch a benchmark at least once a year, but depending on funding needs and general market conditions we can imagine issuing between Eu1bn-Eu2bn per year,” he said.

Schreiner said that the bank added Pfandbriefe to its funding mix in a defensive, strategic move to ensure that it can generate refinancing in the event that its retail savings base failed to grow as envisioned.

“It would stand to reason that a bank with Eu52bn of residential mortgages as at the end of 2010 would take the step to choose Pfandbriefe as a further refinancing instrument,” he said.

The bank’s retail deposit portfolio amounted to Eu80bn at the end of last year and is the largest in Germany, according to an investor presentation.