Norddeutsche Landesbank: 7.5 percent rate of return with the savings Bank

the savings banks are seen as the epitome of boredom. Reliable, but also pretty dull. But currently so much going on in the world of the savings banks, as rarely before, what is the Parties themselves, at the very least right. Finally, the cultivated boredom is part of the business model. Like is suggests: to Whom, if not the savings banks, still trust in these troubled times?

Dennis Kremer

editor in the area of “money & More” the Frankfurt General Sunday newspaper.

F. A. Z.

The beauty of the financial markets is that you can expose ideal images in the wind as wrong: this is what happened these days with the Norddeutsche Landesbank (abbreviated Nord / LB), which is about 35 percent owned by the North German savings banks. Further the owner of the Länder of lower Saxony (60 percent) and Saxony-Anhalt (around 5 percent). Ironically, the bonds of these largely state-owned Bank have in the last few weeks of strong Price reductions. The rates have fallen to well below the value of 100 percent, which in the case of bonds, a clear vote of confidence: Some investors doubt whether the Bank will be able to get the bond money to repay fully. In other words: they keep the Bust the Bank.

The sounds of more than ten years after the collapse of investment Bank Lehman Brothers is still very threatening. But with a little courage, investors can consider the matter from a completely different angle – as a lucrative investment opportunity. Because falling prices are associated with bonds is always rising yields, which is also logical: The higher yield to compensate for the higher risk.

in Particular, in the current zero-interest rate times, this output is in the case of the Nord LB at the moment is very attractive. A bond with a term until October 2023 (ISIN: DE000NLB2HC4), for example, is currently around 7.5 per cent return per year. For comparison: A Federal loan with a considerably longer, ten-year term comes to a paltry 0.25 per cent rate of return. So it is no wonder that private investors, Online brokers act currently does not bond as much as this specific in the securities of Nord LB. Especially since the bond has also a private and attractive denomination of 1,000 Euro, which has become rare. At the current exchange rates, investors do not need to take so 1000 euros in Hand to get in.

But is this really a good idea? For this purpose, it is necessary to deal in detail with two things: with the specific construction of the Nord-LB-bond, and with the overall situation of the Bank. Both of which are closely linked to each other. To consider the construction of a bond dryness sounds like it is. Because the paper of the Nord / LB belongs to a particularly exciting type of bond, the so-called subordinated bonds. These take their name from one simple reason: In the event of a Bankruptcy of the Nord LB, the owners of these papers have to stand in front of other creditors for this right now – you are, as the Name implies, it is not of the same rank.

We should not fool ourselves

The North LB has in the past, many of such subordinated bonds issued. The currently popular paper with a term until October 2023 (in the technical language of the “Lower Tier 2”) have an advantage: unlike many of the other Subordinated debt, the Bank can make the interest payments, not easy to fail, if it has to be a bad year. Also an extension of the term is not possible.