European Securitisation Market Overview
Recent research from KBRA has shed light on the vibrant dynamics of the European securitisation market, particularly as it heads into the year’s final quarter. The market displayed remarkable resilience during Q3 2024, maintaining the strong momentum established during the first half of the year. The anticipated slowdown typically associated with the summer season did not occur, leading to one of the most prolific periods for securitisation volumes since the global financial crisis.
Key Growth Areas in Securitisation
Notably, a variety of sectors have contributed to the surge in securitisation volume. Collateralised loan obligations (CLO), residential mortgage-backed securities (RMBS), and various asset-backed securities (ABS) have notably increased in volume. As of the first nine months of 2024, a staggering EUR117.8 billion in European securitisation transactions have been sold, surpassing the total issuance of any prior year since 2007.
Leading Sectors Driving Growth
The surge in transaction volumes was largely propelled by the robust performance of RMBS, CLO, and both consumer and auto ABS markets. Among these, the consumer asset-backed securities segments have shown particularly impressive growth, more than doubling in volume compared to the previous year. Additionally, the Italian market has emerged as a significant contributor, with loan collateral volumes tripling year-over-year, reflecting a strong recovery in lending activities.
CLO Market Insights
The CLO sector continues to thrive, driven by a significant reset activity in Q3 2024. The market witnessed its second-largest quarterly reset activity in the past five years, indicating strong investor confidence. Total volumes for newly issued CLO transactions have reached EUR35.3 billion, with EUR16 billion associated with resets and EUR1.3 billion in refinancings. Despite looming challenges, such as diminishing arbitrage opportunities, the sector remains on track for a robust year.
Market Outlook Heading Towards 2025
The outlook for the European securitisation market is optimistic as we transition into 2025. Although Q4 could see lighter volumes than previous years due to the remarkable achievements to date, the overall sentiment remains positive. Regulatory discussions aimed at enhancing securitisation frameworks have further bolstered market expectations, creating a favorable environment for sustained growth moving forward.
About KBRA
KBRA, a recognized credit rating agency, operates in multiple regions including the U.S., the EU, and the UK. It provides structured finance ratings that are essential for investors needing to meet regulatory capital requirements across various jurisdictions. This breadth of service underscores KBRA's commitment to supporting the securitisation market.
Frequently Asked Questions
What does KBRA's research reveal about the market?
KBRA's research indicates that the European securitisation market has experienced record-breaking volumes, surpassing previous issuance volumes since 2007.
Which sectors have shown notable growth in securitisation?
Key sectors driving growth include RMBS, CLO, and consumer and auto ABS, particularly led by the Italian lending market.
What does the future hold for the European securitisation market?
The outlook is positive with regulatory reforms expected to foster growth, despite potential lighter volumes in Q4 of 2024.
How significant are CLOs in the current market?
CLOs remain a vital part of the market, with increased issuance and the second-highest reset activity recorded in five years.
Who is KBRA?
KBRA is a full-service credit rating agency that provides essential ratings for structured finance transactions and operates in several major global markets.
