Funding Measures CMB Issuance in Hungary. Presentation by Rita Mayer, Director FHB Land Credit and Mortgage Bank 5 December 2002

Transcription

1 Funding Measures CMB Issuance in Hungary Presentation by Rita Mayer, Director FHB Land Credit and Mortgage Bank 5 December 2002

2 Content I. Introduction II. Mortgage Banking in Hungary III. The Hungarian Mortgage Bond Market IV. FHB s Funding Strategy V. CMBs Issued by FHB VI. Current Barriers VII. Future funding strategy

3 Home ownership rates across Europe Hungary Ireland Spain Belgium Italy United Kingdom Denmark Portugal France Netherlands Germany Switzerland

4 Hungary Greece Italy France Belgium Spai n Portugal Ireland Finnland Austria EU average Germany Sweden United Kingdom Netherland Mortgage loans / GDP% Denmark

5 II. Mortgage Banking in Hungary - Legislation Special law on mortgage banking: Act XXX basis: German model (strict ratios - 60% LTV) CMB-s: fully compliant with relevant EU UCITS directive for covered securities specialist principal (Mortgage Bank as issuer) subject to special supervision (additional coverage supervisor) priority status for CMB holders Modification of mortgage legislation 2001 enhancing cooperation between mortgage banks and commercial banks (purchase of independent lien)

6 II. Mortgage Banking in Hungary - Bond Market Structure (brake down by issuer types) Total Capitalisation: HUF 5,32 trillion (BN EUR 21,28) as of Government Bonds Corporat(including Bank) Bonds Compensation Notes Mortgage bonds HUF Eurobonds T-bills NBH 3M Bonds 8% 19% 4% 0% 1% 1% 67%

7 III. The Hungarian Mortgage Bond Market Institutional set-up: three operating mortgage banks - FHB (1998) - stand alone institution - 100% state owned main focus on residential mortgage fully state owned private and public placements HVB (1999) - member of a banking group predominantly commercial mortgage private private and public placements OTP Mortgage Bank (2002) - member of a banking group mixed loan portfolio 100 % owned by OTP Bank (The biggest Hungarian commercial bank) so far only private placements

8 III.The Hungarian Mortgage Bond Market HVB 6% Market share of outstanding CMBs OTP 28% FHB 66% Total outstanding volume of CMBs as of Nov. 2002: M EUR 503,8 o/w: FHB M EUR 333 HVB M EUR 30,4 OTP M EUR 140,4 After Govies CMBs represent the 2nd biggest asset class of fixed income instruments in Hungary!

9 IV. FHB`s Funding Strategy : Starting period - Relying on private placements average size: 0,5-1,5 BN HUF(2-6 M EUR), 11 closed series, average spread: T b.p. 2001: Shift to public offerings -the reason: focus on residential mortgage lending (3-7% gov. subsidy for CMB funded residential loans with a cap on mortgage loan rate) -the aim : greater transparency and higher liquidity average size:7-20 BN HUF (30-80 M EUR)/series, monthly twin auctions with 1,5-2 fold oversubscription, tap issues, growing auction volumes average spread: T b.p.

10 IV. FHB`s Funding Strategy 2002: 2 Domestic Bond Issuance Program government subsidy up to 10% amendment to the mortgage law - independent lien purchase refinancing agreement with 8 commercial banks - more than 50% of newly originated mortgage loans is refinanced through FHB Distribution: selling and price quoting consortium (7 PD-s )

11 V. CMBs Issued by FHB - as to the year of issuance - Total volume issued in M EUR 333 (in M HUF ) as to

12 V. CMBs Issued by FHB - total outstanding CMBs B N H U F 1 3 M EUR E 2003F E 2003F

13 V. CMBs Issued by FHB - new issues - Year Fixed FRN M EUR

14 V. CMBs Issued by FHB - maturiy profile at the issuance - M EUR above 7 Maturity (year)

15 V. CMBs Issued by FHB - private placements and public offerings- M EUR new issues 250 Private placements Public offerings

16 V. CMBs Issued by FHB - major investors - public offerings - Total amount issued in M EUR 333 ( in M HUF ) Other (Investment Service Providers) 11% Foreign Investors 8% Retail 1% Banks 14% Mutual Savings Co-operatives 0% Insurance Companies 14% Pension funds 20% Investment funds 32%

17 M EUR 300,0 250,0 200,0 150,0 100,0 50,0 0,0 Amount of listed CMBs by FHB on the Budapest Stock Exchange Date 2001 March 2001 July 2001 Sept 2001 Nov 2002 Jan 2002 March 2002 May 2002 July 2002 Sept 2002 Nov

18 V. CMBs Issued by FHB - private placements (M EUR)- Serie Date of issue Maturity (years) Amount Coupon % FJ03AA ,0 3,12 15,50% FJ06ZF ,0 3,20 12,80% FJ06ZV ,0 4,96 10,30% FJ07ZF ,0 4,00 9,70% FJ07ZV ,0 2,00 9,00% FJ08ZV ,5 4,00 10,00% FJ05ZF ,0 6,04 9,70% FJ07ZV ,0 5,68 10,30% FJ06ZF ,3 4,60 11,10% FJ07ZV ,0 0,40 10,70% FJ06ZF ,0 3,00 9,70% FJ08ZV ,0 1,04 9,50% FJ11ZV ,0 4,32 9,30%

19 V. CMBs Issued by FHB - public offerings (M EUR)- Serie Date of issue Maturity (years) Amount Coupon % FJ07NF ,0 25,22 9,6 FJ09NV ,0 18,96 10,4 FJ07NF ,0 32,00 9,5 FJ08NF ,0 37,60 8,25 FJ12NV ,0 42,44 9,25 FJ09NF ,4 32,00 9,25 FJ13NF ,3 20,00 8,5 FJ08NF ,4 38,00 9,5 FJ08NF ,4 40,00 9,25

20 VI. Current barriers Steady growth of mortgage lending - refinancing profile of FHB is strengthening FHB total assets grew by 74% in 2001 Estimated growth in 2002: 95% 21,8% of total assets comes from independent lien purchase Narrow domestic institutional investor base slower increase of the domestic institutional investor portfolio reluctance to diversify fixed income portfolio (overweight of govies) investment limits (internal limits for one issuer, for one serie etc.)

21 VII. Future funding strategy Priorities: expanding the investor base further improving liquidity lengthening the maturity profile (10Yr fix) other technical changes Tools to achieve these goals: international credit rating by Moody s FHB bank rating : A3 FHB HUF denominated CMB series: A1 setting up an EUR 1000M EMTN program entering Euro market, timing: Q1 2003