Our funding mix: solid foundation for stable growth
AKA secures all funding needs for its lending business – even in difficult market phases – and takes additional strength through its special shareholder structure and its business model. AKA’s shareholder banks in particular have been an important source of funding since its establishment in 1952.
Over the last few years, AKA has steadily acquired additional public and private-sector banks as well as investors outside its shareholder structure. The bank takes funds from these investors in the form of term deposits and Schuldschein. AKA executes these transactions in euros (EUR) and US dollars (USD).
Principles of refinancing
- AKA is a non-trading-book bank and its treasury activities solely finance its own lending business.
- AKA offers solidity by means of matching maturities, currencies and fixed interest periods.
- Investors are strategic partners. AKA attaches high importance to its long term relationship-based approach.
AKA as a money market participant
In 2017, AKA raised over EUR 500 million and over USD 1 billion via short-term money market transactions. AKA is principally on the funding side of the market.
Typically, EUR-denominated transactions have a maturity of 2 to 12 months, while USD-denominated funding is primarily raised for 2-6 months.
Secured capital market
In accordance with AKA’s business model, most of its lending business is funded by assigning the ECA cover. Basic principle has always been the refinancing by the shareholder banks’ and public programmes.
Since 2016, AKA has been taking a new approach in this respect, gaining more and more international investors as partners. These partners now provide 15% of all long-term ECA-covered funding. Under its strategy to broaden its European base, the AKA treasury team is working steadily on further partnerships.
Highlight transaction with an international investor
A USD-denominated transaction (EUR 155 million) was funded via an international investor in November 2017 for the first time in AKA’s history. This transaction marks a milestone, which will substantially broaden the bank’s future scope for ECA-covered finance.
Unsecured capital market: Long-term security based on strong partnerships
The shareholder banks are also an important element in our funding basis for unsecured credit facilities. However, strategic growth in the area of Structured Finance requires increasingly more funding for non-ECA-covered transactions.
- Spring to summer 2016: preparation for capital market activities.
- September 2016: announcement that AKA plans to raise long-term funding of around EUR 100 million in the coming year in the maturity between three to seven years with a special focus on four to six years.
- November 2016: issuance of a Schuldschein for AKA for the first time since 2011.
- December 2016: first floating-rate Schuldschein issued.
- May 2017: goal achieved: funding of EUR 100 million raised in the maturity range of three to six years
- End of 2017: Due to on-going long-term funding need and the favourable investor response, a total of EUR 130 million has been placed since the issuance of the first Schuldschein. 60 % of our long term funding has a maturity of four to six years. This maturity range will remain our focus.
- December 2017: term deposit for ten years transacted; this means that the entire maturity curve up to ten years is covered. AKA closed a 10 year transaction and could build up a yield curve of 3-10 years, all within a one year period.
Potential for new investors
AKA is on a steady growth track in the money market sector as well as in the capital market. In this connection, investors – both new and existing, who have been working with AKA for many years – are important strategic partners.
Based on this partnership, we can achieve stability and long-term growth.
A partnership approach is important for us in this respect. It depends on transparency and on-going sharing of information.
