CRH: a unique structure
CRH is a specialised French credit institution established in 1985 and dedicated solely to refinancing housing loans granted by its shareholder banks through the issuance of covered bonds.
Operates as a non-profit, pass-through entity; the largest French banks are both shareholders and originators of the loans refinanced by CRH. They also provide liquidity support to CRH.
Loans remain on the banks’ balance sheets but are pledged to CRH; in case of default, CRH can take ownership of the loans automatically under French law.
CRH’s bonds are highly rated (Aaa/AAA), extremely liquid and eligible for ECB operations, with over EUR109bn in home loans refinanced since inception.
France: macro and fiscal outlook
The outlook for French banks is stable, with profitability expected to improve despite political and economic uncertainty. Asset quality remains robust, though some increase in problem loans is anticipated, especially among SMEs and highly leveraged corporates.
French banks maintain strong capital positions and liquidity buffers, supporting their resilience. France’s sovereign credit profile is anchored by a large, diversified economy, but nevertheless challenged by high and rising public debt and political fragmentation – which caused a rating downgrade by Fitch from ‘AA-’ to ‘A+’.
The political situation has had an impact on the OATs vs Bunds spread, but we believe that the market has incorporated that in the current c.70-90bp yield spread with Bunds. Any more notable change would have to come from a surprise in the appointment of any potential future prime minister or from the 2027 presidential election.
Regulatory framework
CRH’s framework differs from those of other French covered bonds (obligations foncières and obligations à l’habitat) in asset ownership, eligible collateral, and risk mitigation features.
CRH’s eligible assets are limited to domestic residential mortgages and substitution assets, with additional liquidity support from shareholder-provided lines.
CRH employs both internal and external cover pool monitors, whereas others require only an external monitor
CRH covered bond programme and cover pool
As of end-2024, CRH had over EUR18.4bn in outstanding bonds and a cover pool exceeding EUR25.7bn, composed entirely of French residential loans.
The cover pool is of high quality, with a low collateral risk score, low expected losses, and a high share of fixed-rate, seasoned mortgages.
Over-collateralisation is strong (39.9%), providing a robust buffer for investors, and the programme’s required over-collateralisation for ratings is 12.5%.
The pool’s regional distribution and covered bond ‘format’ are precisely managed: the regional distribution is very sensible, almost all covered bonds are fixed-rate, and there is a strong focus on longer seasonings.
CRH’s covered bonds are rated Aaa by the rating agency Moody's and benefit from a preferred risk weighting of 10% in accordance with the CRR. In our opinion, CRH’s EUR benchmarks can be used as Level 1 assets in the context of LCR management. CRH’s covered bonds are suitable as collateral within the ECB’s Collateral Framework. CRH’s newly issued covered bonds can also be marketed under the "European Covered Bond (Premium)" label.
Secondary markets: We see a case for CRH covered bonds to structurally trade tighter
French covered bonds have shown good traction in 2025 YtD, with the iBoxx France covered bond index tightening by 15bp YtD, although of late we have seen a mild widening on the back of the new headlines generated by France’s political situation in early September. Despite the recent headlines, we maintain a positive outlook on French covered bonds. After all, the asset class produces positive carry compared to sovereigns and SSAs, and should there be a resurgence in risk related to France, French covered bonds would represent the lowest-beta product in the country.
Within France, CRH covered bonds look structurally somewhat wide, especially in longer tenors, and they tend to underperform their shareholder banks too often, in our opinion. They also appear to be the first to suffer in the event of political turmoil. Among the arguments we cited above to explain why CRH covered bonds trade wider than their peers, we believe that the perceived sovereign proxy leads, to some extent, to mispriced risk.
CRH landing issuance spread levels are usually significantly inside vs IPTs, possibly indicating overly too wide initial levels from the syndicate banks, which perpetuates the wider structural spread situation of CRH covered bonds compared to peers.
Investors should bear in mind that structurally, CRH is overcollateralised, bankruptcy-remote, and enjoys joint and several guarantees from top-tier banks. This means actual credit risk is significantly lower than the sovereign link implied in market pricing. Moreover, and unlike universal banks, CRH carries no exposure to earnings volatility, litigation, or strategic shifts. It is a pure refinancing utility, backed exclusively by secured lending from top-tier French banks.
We believe CRH covered bonds should trade in line or a few bp tighter as they offer a “best of both worlds” option for investors while benefiting from stronger security guarantees. We see seven reasons why CRH covered bonds should trade at the tighter end of the French covered bond spectrum: a) strong structural support, b) joint and several stakeholder guarantee, c) superior asset quality and exclusivity, d) government and systemic support role, e) homogeneous, superior-quality asset pool, f) deep liquidity and benchmark status, and g) alignment with stakeholders but lower correlation risk.