EBRD invests in PKO Bank Hipoteczny covered bonds

By Axel  Reiserer

EBRD invests in PKO Bank Hipoteczny covered bonds

Bank participates in the second euro-denominated covered bond issuance

The European Bank for Reconstruction and Development (EBRD) has subscribed to €35 million in covered bonds issued by PKO Bank Hipoteczny (PKO BH). It is the second euro-denominated, fixed-rate covered bond issuance of PKO BH, backed by Polish-zloty-denominated residential mortgage loans and with a rating of Aa3 assigned by Moody's, which the highest possible rating for Polish debt securities.

The covered bond issue reduces the maturity mismatch on PKO BH’s balance sheet and enhances and diversifies PKO Bank Polski Group’s financing structure by providing access to long-term funding for its mortgage loan portfolio.

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, the largest commercial bank in Poland.

The EBRD investment aims to strengthen the local capital market, one of the Bank’s priorities in its activities in Poland to support sustainable growth and a resilient economy. The EBRD’s new transition concept argues that a well-functioning market economy should be integrated, competitive, inclusive, well-governed, green and resilient.

The EBRD 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 Development Initiative and following a request by the Polish Ministry of Finance, the Bank engaged in drafting legal provisions for the new law, together with a working group organised by mortgage banks together with the ministry. The revised covered bond law was approved by the Polish Parliament and entered into force on 1 January 2016.

Lucyna Stańczak-Wuczyńska, EBRD Director for EU Banks in the Financial Institutions group, said: “We are pleased to participate in this second bond issuance by PKO Bank Hipoteczny which illustrates the remarkable progress Poland is making with capital market development. The appetite in the market is a sign of investors’ confidence in the issuer as well as in the Polish economy. Despite significant progress much remains to be done and the EBRD stands ready to deploy its funds, policy dialogue and expertise to promote further progress.”

Rafał Kozłowski, CEO of PKO Bank Hipoteczny, said: “We are consistently diversifying the funding sources of PKO Bank Polski Group, and we are extending their maturities. We successfully conducted the second international benchmark-size issuance of euro-denominated covered bonds. In this way we confirmed our strategy of being a regular covered-bond issuer on the European market.”

Since the beginning of its operations in Poland in 1991, the EBRD has invested almost €8.5 billion in more than 380 projects in the country. In addition to its wide range of products for banks and companies, in recent years the EBRD has also built a growing portfolio of investments (both equity and debt) in the Polish financial sector, for which demand remains high.