Lloyds Bank with benchmark debut

We are very satisfied with the success of our ‘inaugural’ Pfandbrief. The great interest and the approval of investors not only confirms a good market entry, but also that we have opened up a new financing instrument for our bank that we can build on moving forward.

Lloyds Bank is a digitally oriented retail bank. As subsidiary of the British Lloyds Bank Group the bank operates in Germany out of its headquarters in Berlin and in the Netherlands out of its Amsterdam branch. In the Netherlands, the property financing business for private customers is very successful. An interesting aspect, that we can use Dutch residential property financing as cover assets for the German Pfandbrief, which requires to have each individual property revalued in compliance with the formal criteria of the BelWertV (Mortgage Lending Value Directive).

The mortgage portfolio used as coverage for our first and hopefully the next Pfandbriefe has almost ideal textbook typical aspects of a diversified portfolio. For the cover pool of our first Pfandbrief of EUR 500 million, we took around three thousand loans into coverage, the properties of which were all individually revalued to comply with the formal requirements of German Pfandbrief law. Although the quality of the Dutch valuations is very good, the Dutch consumer protection rules formally conflict with the procedure required by the German Regulation on the Determination of the Mortgage Lending Value. It is therefore a very small-scale portfolio consisting of private, owner-occupied homes and flats with a corresponding geographical distribution across the Netherlands. The ideal portfolio structure and our conservative lending strategy have excited investors and generated a great deal of interest.

We have had positive initial feedback with investors being very satisfied with the performance of the Pfandbrief. We approached the pricing of the first Pfandbrief with a sense of proportion and took the investors’ wishes into account with regard to the term (5 years). Prices have risen since the issue (spreads have narrowed), which shows that there is sustained interest in the securities.

We want to establish ourselves as an issuer in the market and appear regularly at the market. We have sufficient loans in the portfolio and an active new business for potentially many more Pfandbriefe. The bottleneck is to carry out the valuation of the properties in accordance with German requirements.