Egg Bank is putting together what will be the U.K.'s first synthetic residential mortgage-backed securitization to be sold on the public market. The Internet bank will also be the first U.K. bank to use KFW's Provide platform, which is a standardized legal and transaction structure. Ian Haywood, head of wholesale markets at Egg's London office, declined to elaborate on the deal. The deal's size and timing could not be learned.
To date, Egg has completed two credit card securitizations, both of which were £500 million in size and lead managed by Deutsche Bank. An official at Deutsche Bank says the firm is not involved in the Egg synthetic, however.
Egg has done a private synthetic RMBS, says one analyst. He notes that as a thinly capitalized Internet bank, Egg is a good candidate for using synthetic trades to recycle capital. He speculates the deal is being done primarily for capital relief purposes. Egg's mortgage book is about £2 billion.
Another analyst says that while private synthetics happen from time-to-time in the U.K., he does not expect there to be a huge amount of this type of business going forward. For one thing, most U.K. RMBS issuers use securitization to raise cash, not for regulatory capital relief.
Earlier this year, KfW said it intended to roll out its synthetic securitization services to issuers outside of Germany (BW, 2/10). The Provide program, in effect, is a standardized legal and transaction structures that permits issuers to reduce their transaction costs. KfW began the program to promote the origination of small- and medium-enterprise loans and residential mortgages. Last year, these programs accounted for E29 billion in issuance.