Tutorial: s Wohnbaubank bonds

What are s Wohnbaubank bonds?

s Wohnbaubank bonds are convertible bonds issued by s Wohnbaubank, which means that investors may exchange their s Wohnbaubank bonds for participation certificates in s Wohnbaubank at a later point in time, should they wish to do so.

The capital raised through s Wohnbaubank bonds is used for the construction of residential space in Austria. For private investors subject to Austrian tax the annual interest income of up to 4% is exempt from capital withholding tax irrespective of holding period and date of initial investment. This means that the yield after tax is higher than for ordinary bonds with the same rate of interest.

How do s Wohnbaubank bonds work?

s Wohnbaubank bonds work like any other bond (see tutorial on bonds for more information).
There are s Wohnbaubank bonds available with fixed interest rate and with floating interest rate. Interest income from residential convertible bonds of up to 4% is exempt from capital withholding tax.

Your benefits

s Wohnbaubank bonds combine interesting coupon payments with preferential tax treatment.

Your advantages

Interest income of up to 4% is exempt from capital withholding tax.
The proceeds of s Wohnbaubank bonds are mainly invested in residential housing in Austria.

Risks you should be aware of

Change of market interest rates and credit rating of s Wohnbaubank may lead to price fluctuations and capital loss in case of sale before maturity date.
The legal basis for special tax treatment may change during the term of the bond.
s Wohnbaubank bonds bear a liquidity risk and credit risk of the issuer.
There is no deposit guarantee scheme. Investors are exposed to the risk that s Wohnbaubank AG may not be able to meet its obligations arising from the bond in the event of insolvency or over-indebtedness or from an official order (bail-in regime). A total loss of invested capital is possible.

How do s Wohnbaubank bonds react to…

… rising interest rates?
s Wohnbaubank bonds with fixed interest rate fall when interest rates are rising. s Wohnbaubank bonds with floating interest rate, on the other hand, benefit from rising interest rates. Given that these bonds ("floaters") have their interest rate periodically adjusted to a referential rate such as the EURIBOR, an increase in the level of interest rates also means a rising interest rate for the bonds. The price of the bond tends to oscillate around face value.

… stable interest rates?
In the case of stable interest rates, neither the price nor the coupon of s Wohnbaubank bonds changes (if other criteria, e.g. the rating of the issuer, stays unchanged).

… falling interest rates?
s Wohnbaubank bonds with fixed interest rate increase when interest rates are falling. Falling interest rates, on the other hand, have a negative impact on s Wohnbaubank bonds with floating interest rate. Given that these bonds ("floaters") have their interest rate periodically adjusted to a referential rate such as the EURIBOR, a decrease in the level of interest rates also means a falling interest rate for the bonds. The price of the bond tends to oscillate around face value.

INFORMATION FOR PRIVATE CLIENTS / CONSUMERS

Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.

Look for:

Products

Our offer for