LHV Bank Issues 250 million EUR of Covered Bonds at 0.12% yield


AS LHV Pank completed today the inaugural issue of 250 million euros of covered bonds with five years maturity. The covered bonds were issued with the goal of diversifying the bank’s funding structure and reducing funding costs. The covered bonds will be listed on Euronext Dublin.

The covered bonds backed by Estonian residential mortgage loans were offered to European institutional investors. In total 28 investors participated in the offering and the issue was 1.9 times oversubscribed. Out of total order book 41% was received from central banks and international institutions, 29% from institutional investors in Germany, Austria and Switzerland, 19% from Nordic investors and 11% from institutional investors in other countries. The covered bonds were issued at a spread of 40 basis points over the mid-swap rate. Total re-offer yield of the covered bonds was 0.12%. The covered bonds will be listed on Euronext Dublin presumably within one week and the expected rating from Moody’s Investors Service Ltd is Aa1.

"We are glad that LHV’s inaugural issue of covered bonds was so well received by investors. The issuance of covered bonds in the amount of 250 million euros is a step towards longer term and more diversified funding structure for LHV. It enables us to refinance short term deposits raised from deposit intermediation platforms with longer term funding and at a lower cost. Mortgage loans are a long term product which require a stable source of funding. In the longer term, lower funding costs for the bank also translate into more beneficial funding for our clients", commented Erki Kilu, the Chairman of the Management Board of LHV Pank.

"It was an inaugural bond transaction on international markets for LHV Pank. Wide investor interest in the covered bond issue demonstrates the strong standing of LHV Pank, the Estonian economic environment and the Estonian residential mortgage market among investor community. The provisional credit rating of the covered bonds Aa1 from Moody’s Investors Services is also an indication of high quality and very low credit risk of the covered bonds. We intend to be back in the market for more issues of covered bonds in the future," added Kilu.

LHV started issuing residential mortgage loans in 2016. Based on the recommendation of the Estonian Financial Supervision Authority, the European Central Bank granted to LHV Pank an additional authorisation to issue covered bonds on March 18, 2020. Moody’s assigned on May 5, 2020 a provisional credit rating of (P)Aa1 to the covered bonds. The Base Prospectus of LHV’s Covered Bond Programme was registered on May 19, 2020. The Estonian Covered Bonds Act took effect in March 2019.

Information on LHV’s covered bonds is available at:

LHV Pank is the third largest bank in Estonia. LHV Pank is 100% owned by LHV Group which is listed on Nasdaq Tallinn. In addition to banking services, LHV Group includes the asset management company LHV Varahaldus. LHV Group employs over 460 people. LHV’s banking services are used by nearly 219,000 clients, and pension funds managed by LHV have nearly 178,000 active investors.

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