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Moody's reports: EMEA RMBS's strong growth to persist in 2007

January 24, 2007 | Cbonds

The Residential Mortgage-Backed Securities (RMBS) market in Europe, Middle East and Africa (EMEA) had another strong year in 2006. The total volume of credit risk transferred in 2006 increased by 39% year-on-year to EUR274.4 billion and the sector is expected to continue growing at a similar or slightly lower rate in 2007, Moody's Investors Service says in its "2006 Review and 2007 Outlook" for this asset class.

"The year-on-year volume growth rate of 39% in 2006 surpassed the 32% rate recorded the previous year. The number of transactions also saw continued growth: a total of 155 transactions closed during the year, compared to 123 in 2005," says Kruti Muni, Moody's Vice President and Senior Analyst.

With EUR141 billion of issuance volume, UK increased its dominance of the EMEA RMBS market to 51% in 2006 from 41% in 2005. The Netherlands and Spain maintained their relative ranking, accounting for 15% and 14% of EMEA RMBS credit risk transfer volume respectively. The strong performance of the Irish economy and steady growth of house prices in Ireland helped raise its credit risk transfer volume weight in 2006 to 4% of the EMEA total from 0.9% in 2005.

A significant new entrant in 2006 in the EMEA RMBS landscape was Russia, although volume remains marginal at this stage. It issued a total of EUR377 million through four transactions, one of which was domestic; Moody's expects more activity in this region in 2007. Tunisia was also a first-time entrant to the EMEA RMBS market with one transaction rated on a national scale basis. Belgium, after being absent from the market in 2005, issued two transactions in 2006.

"The EMEA RMBS market has still not reached its full potential and there is a large untapped potential of mortgage loans on balance sheets of banks in the EMEA zone," says Barbara Rismondo, Moody's Vice President and Senior Analyst. "Emerging markets such as Russia, Central Europe and the Middle East are expected to contribute to the growth in the number of transactions to be securitised in 2007, with developments such as the passage of a domestic securitisation law in Kazakhstan in 2006 set to help in this respect."

Nevertheless, the main growth in volume is expected to come from the already-established European markets such as the UK, Netherlands, Spain and Italy. Moody's expects the EMEA RMBS sector in 2007 to continue growing at a similar or slightly lower rate than 2006.



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