Alexander Ruf, Director of Funding & Investor Relations at NIB Photo: Antti Yrjönen
21 Jun 2022
NIB Funding’s outlook for second half of 2022
As the markets have been in a bit of a turmoil recently, the NIB Newsletter sat down with Alexander Ruf, Director of Funding & Investor Relations at NIB, to ask about the Bank’s funding outlook for the second half of the year.
“The attributes which make NIB an attractive investment remain intact; NIB’s AAA/Aaa rating, the strong ownership of Nordic and Baltic countries, a prudent approach to our banking business, some rarity value, and our strong focus on sustainability. Markets are in a transition phase to a new regime, and we don’t know how the war in Ukraine will develop, so there are enough uncertainties. For our funding activity this just means we must be even more responsive to investors’ needs and make sure to seize opportunities when available,” says Alexander Ruf.
What can investors expect from NIB’s funding for the rest of the year?
“A constant in our funding plan are two US dollar denominated large-sized bonds in global format, so that’s one project we will look at after the summer break. Nordic currencies are another focus, and if we find the right assets, issuing more NIB Environmental Bonds is on the agenda as well. We will continue to serve specific investor needs and offer private placements. The programme will likely end somewhere around EUR 8 billion, so the year will continue to be busy.”
How has the funding so far this year been for NIB?
“Our assumption at the beginning of the year was that ‘the pandemic situation is going to slow down towards summer and then it’s back to normal’, more or less. Unfortunately, things turned out very differently. The Russian invasion and war in Ukraine are foremost a human and political catastrophe. In capital markets, fast rising inflation rates and swift change in central bank policies changed the situation in funding markets profoundly.”
Concerning the war in Ukraine, what has the reaction been among the investors?
“To us it was clear that investors will demand transparent and clear information about NIB’s loans in Russia, Belarus and the Ukraine. So, in every meeting we make sure to take up the topic right at the beginning to address any possible concerns. We only have a very small amount of old loans in Russia and Belarus outstanding, therefore investors don’t have concerns about NIB specifically, but they often take the opportunity to learn more about the policy response to the war in Finland, Sweden, and the Baltic countries.”
Where does NIB stand in its funding programme and what are your observations from the half year of 2022?
“We have so far raised about EUR 5.5 billion through 58 bond issues, and by the year-end we expect to have issue for about EUR 8 billion. Among the larger transactions were a three-year US dollar benchmark bond, NIB Environmental Bonds in both euros and Danish Kroner and two bigger issues denominated in British Pound. Issuances in Norwegian and Swedish Kronor and many bespoke transactions in various other currencies for single institutional investors added to the programme.”
“Without a doubt, debt capital markets have become more challenging, high inflation, very fast increase of interest rates and central bank monetary policy changes—all this makes investors more cautious and at times also reluctant to invest. But in challenging markets there are also chances, particularly the segment for bespoke transactions, so called private placements, offered good opportunities as investments in more complex transactions receiving help from the rise in interest rates.”
“In many markets we saw increasing differences between prices of secondary and primary market bonds. Certainly, this is one consequence of the market and policy changes we discussed, and it makes price discovery and timing for bond issuance more complex,” says Ruf.