NIB funding benefits from flight to quality

For the financial markets, 2011 turned to be very turbulent year. In the challenging environment NIB benefited from investors flight to quality and raised almost EUR 3 billion at favourable costs.

In 2011, NIB has borrowed a total of EUR 2.9 billion in 10 different currencies through 37 transactions. The average maturity is 5.3 years. The long average maturity has been achieved by issuing 15-20 year transactions in the NOK and SEK and a NZD 10-year transaction in the Kauri market. The funding cost in 2011 is among the most favourable in the banks history.

How has NIB been able to achieve the low cost and long duration in such a challenging market?

“There is no doubt that it has been an advantage to be a Nordic borrower, because the region has been considered less risky than other parts of the world. NIB has taken the advantage of being a Nordic Supranational with 95% of the owners having an AAA/Aaa rating”, says Lars Eibeholm, the Bank’s Head of Treasury and CFO.

Another advantage for NIB is its predictability. In recent years, NIB has stuck to its mandate. NIB has a strong loan book and the credit losses have remained very low.

In this environment it has also been beneficial to be a small issuer which is not forced to access the market in volatile times frequently.

The investor distribution has changed a bit over the last couple of years. Central banks used to be the most important investor base, especially in public deals but also to some extent in private placements. Central banks are still very important, but now also asset managers, banks, insurance companies and even corporations are participating in NIB’s funding program to a larger extent.

Asia has always been very important in NIB’s funding program and the region remains essential, but at the same time we are seeing a much broader investor distribution now. For example, about one-third of investors come from Europe, one-third from Asia and a little bit less than one-third from the Americas.

This development is positive, because an important part of NIBs funding strategy is to have a diversified global investor base.

“Going forward we expect the market to be very challenging. The situation in Europe is very uncertain and how this will affect the Nordic region is unclear. In this environment investor relations has become even more important as we have to explain in greater detail how NIB will meet these challenges,” says Jens Hellerup, Head of Funding and Investor Relations.

“Despite the challenges, we at NIB look forward to 2012,” adds Mr Hellerup, “to meeting our investors and the banks, to making successful transactions and maintaining our role as one of the strongest and most reliable issuers in the world.”

See also Funding highlights.