Securitization in central and eastern Europe is fast becoming a key strategic element of banks’ funding portfolios as the volume of asset-backed issuance in the region sky-rockets.
Igor Zeletsky, structured finance analyst at Moody’s Investors Service in London, said Russia alone could generate as much as $7 billion worth of offshore issuance in 2007, more than double the $3.4 billion launched in 2006 and a far cry from the $198 million seen in 2005.
Martin Grull, Raiffeisen International’s chief financial officer told Emerging Markets that securitization is “becoming an increasingly important tool to finance our dynamic growth in central and eastern Europe.”
Raiffeisen International recently launched its first transaction in Russia, a $400 million auto loans ABS originated by ZAO Raiffeisenbank Austria, the biggest foreign-owned bank in the country.
“It’s a win-win-win situation for all parties involved,” Grull said, adding that while its local banking subsidiary benefits from capital relief and relatively cheap, long term funding, RZB is able to position itself as a strong lead manager and structurer of securitizations, and investors in the Austrian bank benefit from the improved returns on equity deriving from the transaction.
Going forward, Grull said that the bank will seek to leverage its market leadership in central and eastern Europe to generate further transactions: “We are now the biggest originator of securitizations in the region because of our 3,000-strong branch network.”
The bank has already issued deals in Poland and the Czech Republic, securitizing vehicle leases and consumer and small business loans. Also in the pipeline is a residential mortgage-backed deal for Raiffeisen Bank Aval in Ukraine, the latest jurisdiction to catch the securitization bug. Privatbank, the country’s largest financial institution, kicked off cross-border ABS issuance from Ukraine with the launch of a $180 million residential mortgage-backed securitization via UBS in February.
Alex Medlock, head of debt capital markets origination at VTB Bank Europe in London said: “We expect to see upwards of $500 million of cross-border deals from Ukraine by the end of the third quarter.” Specialist mortgage lender International Mortgage Bank (IMB) is preparing a $100 million RMBS warehouse facility via VTB Europe and Banco Finantia.
Yuriy Blaschuk, IMB’s chief executive officer, said that securitization has been at the heart of the bank’s business model since its inception in 2005. He added that securitization will bring liquidity to the banking sector in Ukraine and allow banks to better manage their balance sheets. “Undoubtedly, all parties, both international investors and the Ukrainian banking sector, will benefit from using this debt instrument,” he said.
At least four other institutions are looking to launch debut securitizations, say market participants. Meanwhile, at the end of the third quarter, RZB’s Bulgarian operation is looking to launch a E150 million transaction of lev-denominated consumer loans which would mark the first ever offshore securitization of consumer loans from Bulgaria.