Bank of Ireland’s (BKIR) first public covered bond (ACS) issuance in three years, on which NCB acted as co-lead, should be welcomed by the market for a number of reasons.
Investors should be encouraged by the recent firming of key economic data points around the Irish ACS pool and also the attractive yield on offer from the new issuance (especially given the robust nature of the collateral backing it).
For BKIR, the sale ticks a number of important boxes – it lowers its reliance on Central Bank funding, enhances the liquidity of the public ACS issuance, extends the maturity profile and may represent an opportunity for a re-rating of its ACS.
We also believe, given the recent pick-up in investor appetite for peripheral covered bonds, that Bank of Ireland’s move is a very timely one. Following positive moves around the Sovereign in the year to date, to see one of Ireland’s pillar banks successfully re-engage with the bond markets through a well-covered sale of €1bn worth of ACS underlines that what was formerly a ‘vicious circle’ may be starting to give way to a ‘virtuous circle’. For further detail, please see our research note, which is available from this link: www.ncbresearch.com/PDF_Archive/2012-11/ACSnote.pdf
In addition, we also highlight Bank of Ireland’s statement following the successful ACS sale, which: (i) breaks down the allocation, 98% of which was outside of Ireland, by country and (ii) profiles the investor type involved. The statement is available from this link: www.ncbresearch.com/PDF_Archive/2012-11/BKIR.pdf
Philip O’Sullivan, Chief Economist, NCB Stockbrokers Limited.