Funding in 2013: interim results, highlights and outlook

Halfway through 2013, NIB’s funding team can look back at a very good start to the year.

The framework for this year’s programme remained almost unchanged from previous years: Funding requirements of about EUR 4.5 billion should be raised at the lowest possible costs, taking diversification of funding sources and maturities into account. Issuing USD benchmarks continues to be the cornerstone of NIB’s funding strategy.

The Bank has accomplished 66% of the funding requirements for 2013. The main reason for having a big part completed early in the year was the successful issuance of a three-year USD 2 billion benchmark transaction in February.

NIB’s biggest USD benchmark ever

The USD 2 billion benchmark transaction was a milestone in NIB’s funding history. It is the largest transaction ever undertaken by the Bank. The order book grew beyond the two billion mark within one hour of bookbuilding and reached USD 2.7 billion at the time of pricing; the biggest order book in the Bank’s history. Since orders were of very high quality, it was decided to accommodate the demand and issue a bigger size. At the same time, it was possible to achieve a more favourable price for NIB compared to initial price guidance.

Since the launch the transaction has performed well, supported by the strong interest in NIB amongst international investors.

NIB Down Under

More than a third of this year’s funding volume, around EUR 965 million, is denominated either in Australian or New Zealand Dollars. NIB has a long-standing commitment to both markets and took advantage of opportunities in the long and medium part of the yield curves.

The AUD 2022 line was increased to AUD 875 million, which makes it the largest outstanding NIB AUD line and an important contribution for maintaining long maturity.

The NZD market offers smaller sizes; however, NIB took advantage of its good position there and sold NZD 525 million five-year notes. The transaction is remarkable, since it was the largest issue ever settled in the primary Kauri market since 2006. It was increased later to NZD 700 million, which makes it NIB’s largest outstanding issue in NZD.

The Nordics and diversification

Nordic currencies are an important part of the funding programme, because many of the Bank’s loans are disbursed in SEK, NOK and DKK. A new five year benchmark transaction in Norwegian kroner and a NOK 500 million tap to last year’s five-year bond corresponded well with NOK needs on the lending side.

Private placement transactions allow NIB to react to the very specific needs of investors in terms of currency or interest rate exposure. So far, volumes of these structured issues have been fairly low, but issuance in currencies such as Mexican Pesos, South African Rand and Turkish Lira gives access to different investors compared to the usual benchmark buyers.

Outlook

In the second half of the year the funding team will continue to be active in a variety of markets. Nordic currencies will stay in focus, but we will try to be visible in other currencies. Also, the attractiveness of a second USD benchmark transaction will be carefully assessed. Finally, meeting investors is an important part of NIB’s funding activities and NIB’s funding team will in the second part of 2013 also be visible for as many investors as possible.