Nykredit Groups´ main business activity is mortgage lending. The mortgage lending is carried out by Nykredit Realkredit which is incorporated as a specialized mortgage bank. According to Danish legislation mortgage banks are prohibited from taking deposits, issue guarantees or perform other financial services than mortgage lending and must only fund its mortgage lending by issuing covered bonds. Consequently covered bonds make up the vast majority of Nykredit Group’s funding.
Nykredit Bank is the groups deposit taking entity and performs all kinds of banking business except mortgage lending funded with covered bonds. The bank funds its lending and investment banking activities by a mix of retail and wholesale deposits and various types of capital market funding. It is the bank’s aim to have stable deposits at all times at least equal to loans to customers.
NYKREDIT GROUP FUNDING MIX
The maturity profile of Nykredit Group’s funding reflects to a large extent the characteristics of the mortgage loan portfolio. About a quarter of Nykredit’s mortgage portfolio is funded to maturity - typically for 20 or 30 years. The loans and the issued bonds are typically callable at par value several times a year and Nykredit does therefore not incur any prepayment risk in relation to customers redeeming their loan early.
Mortgage loans with fixed rate for 1 to 5 years are popular in Denmark and these loans are funded to the first interest reset date. For these so-called Adjustable Rate Mortgages Nykredit rolls the funding by auctioning new bonds that will fund the loans until the next interest reset date.
In order to manage refinancing risk Nykredit auctions short dated covered bonds 4 times a year to fund maturing covered bonds. The auctions are held 30 to 50 days prior to maturity of the old bonds.
|Covered Bonds||Senior Secured||Senior Debt||Commercial Papers||Subordinated Capital|
|Isuuer||Nykredit Realkredit||Nykredit Realkredit||Nykredit Bank||Nykredit Bank||Nykredit Realkredit|
|Mainly domestic||Domestic and international||EMTN||EURO CP||Mainly international|
|Maturities||1-30 years||2-10 years||2-10 years||1-364 days||Long/perpetual|
|Currencies||DKK, EUR and SEK||DKK and EUR||DKK and EUR||Scandi and all major||DKK and EUR|