Bank participates in inaugural euro-denominated benchmark issuance
The European Bank for Reconstruction and Development (EBRD) will subscribe to €20 million in covered bonds issued by PKO Bank Hipoteczny S.A. (PKO BH). It will be an inaugural, euro-denominated, fixed-rate covered bond benchmark issuance, backed by Polish zloty-denominated residential mortgage loans and with a provisional rating of Aa3 assigned by Moody's.
This will be the third covered bond issue by PKO BH under the new covered bond legislation in Poland that came into force on 1 January 2016. It is also the third issue of mortgage covered bonds in Poland secured exclusively by PLN-denominated housing loans for individuals. The currency risk is mitigated by PKO BH with a cross-currency swap.
PKO BH is one of three mortgage banks operating in Poland, specialising in PLN-denominated residential mortgages. The bank, which started its operations on 1 April 2015, is a 100 per cent subsidiary of PKO Bank Polski S.A., the largest commercial bank in Poland.
The EBRD has played an active role in the development of the new legal framework for covered bonds in Poland. Under its Local Currency and Local Capital Markets Initiative (and following the request by the Polish Ministry of Finance), the EBRD reviewed and provided comments and recommendations to the new Act on Covered Bonds and Mortgage Banks, based on the best international practices.
The covered bond issue reduces the maturity mismatch of PKO BH’s balance sheet and enhances and diversifies PKO Bank Polski S.A. Group’s financing structure by providing access to long-term funding for its mortgage loan portfolio.
Lucyna Stańczak-Wuczyńska, EBRD Director for EU Banks in the Financial Institutions Group, said: “We are pleased to participate in this important transaction. It shows that there is a need for this type of instrument from Poland on the European capital market. The EBRD remains ready to support this development with its funds as much as with its expertise and policy dialogue.”Rafał Kozłowski, CEO of PKO Bank Hipoteczny, said: "The participation of the EBRD in PKO Bank Hipoteczny’s debut issue of euro-denominated covered bonds, backed purely by PLN-denominated housing loans, is the best proof of trust in PKO Bank Polski Group and in the amended Act on Covered Bonds and Mortgage Banks. It is also a confirmation of the strength of the Polish economy and its long-term stability.”
Since the beginning of its operations in Poland in 1991, the EBRD has invested €7.8 billion in more than 370 projects in the country. In addition to its wide range of products for banks and companies, in recent years the Bank has also built a growing portfolio of investments (both equity and debt) in the Polish financial sector, for which demand remains high.
Strengthening economic resilience is one of the three key priorities of the EBRD under its current business strategy to re-energise growth in its countries of operations. The two others are promoting integration and addressing global and regional challenges.