Portfolio Solutions House of the Year – NatWest Markets
NatWest Markets' securitization business has emerged stronger and more focused than ever, turning the constraints of balance sheet and funding imposed by the UK’s ring-fencing regime and the challenges of RBS's history into a competitive advantage — and forging a distinct identity around the more complex and esoteric end of the securitization markets.
RBS, now rebranded as NatWest, has been through the wringer, and so has investment bank NatWest Markets.
The bank has had to pick its spots carefully, and make sure it is distributing risk and sourcing capital from the market, rather than using balance sheet bluster to win business.
But that’s paying off, with NatWest Markets showing strength and depth in the private parts of the securitization markets, from fintech financing at its earliest stages to NPL financing, advisory and repo, securitized derivatives, and risk transfer.
It’s now relatively rare to see NatWest Markets show up on a flow UK RMBS deal. Instead, a look at even its public tombstones shows Spanish reperforming loans, Irish niche prime, Spanish SMEs, and UK second charge, among other asset classes.
Lots of banks talk the talk about financing fintechs, but that usually means late stage — once a platform has enough assets to issue a securitization in institutional size, the big banks show up. NatWest Markets, though, gets in early. That means committing lending capacity to platforms with little track record, and boosting advance rates by bringing in external mezzanine funding.
It helps that the bank has an extensive “alumni network” from the dark days of restructuring, many of whom have found new roles in the emerging fintech ecosystem, but it’s also part of a deliberate attempt to carve out a niche in the broader landscape.
More surprising, for a bank still owned by the UK state, is the breadth and depth of NatWest Markets' commitments to portfolio financing and NPL business in southern Europe.
The bank’s trading desk has committed lots of funding to banks in Greece and Italy, based on long-term, structured repos backed by securitizations or secured notes — as well as financing private equity and hedge fund clients active in these markets, using repo, margin loans, total return swaps, partial-recourse structures, as well as ordinary securitization-format leverage.
Again, the bank makes a virtue of its tight focus. Having long ago sold off its equity and corporate finance businesses, and spent years working through RBS’s own problem assets, the NatWest Markets securitization team are deeply experienced in structuring and selling non-core portfolios, with no other advisory mandates to distract them — recent deals include Greek servicing platforms and shipping loans, Italian, Greek and Portuguese NPLs, among others.
The tightly-knit securitization team is also highly active in providing structured CRE loan-on-loan funding, plus innovative forms of fund finance and leverage for private debt funds. While other banks offer leverage against commercial real estate and against credit funds, these often sit far away from asset finance and securitization teams — NatWest, however, makes a virtue of its past restructurings by bringing top tier structuring skills from the securitization business to bear on other closely related businesses.
Structured derivatives has also become a specialty for the bank, with innovative products to hedge forward loan origination, total return swaps referencing Turkish DPR securitization, the first Sonia balance-guaranteed swap, and perfect asset swaps on leveraged loans among the highlights over the last year.
NatWest Markets may not be the biggest bank out there, or lay out the most balance sheet, but it’s developed deep expertise in some of the most challenging and technically complex areas of the securitization and portfolio financing markets. Moreover, it has done so against a backdrop of restrictions on funding and risk-bearing capacity imposed by UK regulators and by the history of RBS as an institution — forcing it, of necessity, to worker smarter as well as harder. 2019 was a banner year for the carefully honed NatWest Markets team, GlobalCapital’s Portfolio Solutions Bank of the Year.