Brian Morrison, director, group treasury and international, Abbey National Treasury Services
To what extent are you able to predict your funding needs in advance? And how have those funding needs changed in the last 12 months?
Due to the nature of the business, in terms of an asset and liability base that is fairly predictable, we are able to have a large degree of confidence as to our funding requirements going forward for the coming year or so.
The area that is hard to predict is what markets we will look to access in the future so as to achieve the best blended funding cost that allows us to meet our internal liquidity constraints.
This means that we try to take as flexible an approach as possible to different products, structures and investor bases.
Over the years we have tried to build up a diversified source of funding, be it geographical or by recognising that different investors may have specific, different interests.
This has involved the establishment of a number of programmes to allow us to issue easily into different markets, such as the SEC registered programme, and products such as the Holmes Securitisation programme.
How much of your funding is raised in the structured market, and how much in vanilla debt or MTNs?
Of the senior medium term funding, we expect to issue 50% of our requirement a year through private placements, much of that through the MTN programme, with the rest taken through the public market.
Of the private placements, approximately 75% by volume is structured.
How much of your issuance is based on reverse inquiry?
A large proportion of our issuance is based on reverse enquiry.
As Abbey is a reasonably frequent borrower, intermediaries know that our name can be put forward as a potential issuer when suggesting investments.
At other times, our name is well known enough that an investor will ask for our name specifically and this hopefully leads to a private placement or a lead order for a larger trade.
Which currencies and maturities do you see offering attractive arbitrage over the next six months?
Over the last four years, the concept of arbitrage opportunities for borrowers has rather disappeared.
The markets are much more homologous across different currencies and tenors, such that strict arbitrage opportunities are now rather infrequent.
Instead, good opportunities are now driven by investors' needs and recently these have been driven by a wish to stay with safer credits and in shorter maturities.
It is hard to envisage a shift to longer maturities until economies start to recover and interest rates rise.
Has the volatility of the markets in recent months disrupted your issuance plans, and if so, how?
There is little doubt that the markets have been rather tough in recent months, however, it has been possible to continue with one's plans, provided an issuer is prepared to remain flexible.
The recent tier one issues that Abbey National undertook showed both that the markets were still open and that by choosing more than one market to approach, it was still possible to raise the desired volume of capital.
In the senior markets, Abbey National and other financial institutions have been lucky in that the stresses in medium term credit spreads have led to a rise in liquidity that the banks have been able to tap into in the short end.
Are recent changes in strategy likely to have any effects on your issuance?
In the scheme of the overall balance sheet, any changes in the Abbey National strategy are unlikely to have much impact on the overall issuance programme.
What can a financial like Abbey National do to reassure credit investors in difficult markets?
This has been a difficult year for most financial institutions, with credit investors being concerned about everyone's exposures to the many credits that have been in the headlines from a negative perspective.
Reassuring these investors can be best achieved through honest disclosure and through results. Understandably, in the current environment, this will require some proof going forward through a couple of reporting periods.
Can we expect more tier one issuance from Abbey?
Under current plans, we are unlikely to return to the tier one market this year.
Does the presence of HBOS as another major issuer in the MBS market affect your issuance plans for the Holmes series? Is there room for you both in the market?
We are actually quite delighted that HBOS has joined the MBS market as an issuer as this does much to help grow this market and there is room for more than a single issuer.
The structure of their transaction is nearly identical to the structure that Abbey National has used, through the Holmes product, and this should mean that investors are less likely to be confused than if there were a number of different forms of this type of structure.