The earliest placement of mortgage bonds in the history of the Russian market took place

The earliest placement of mortgage bonds in the history of the Russian market took place. Until now, banks have traditionally waited until spring to carry out their first securitization. Players are optimistic about the prospects for the instrument this year – they expect the emergence of new names among banks, an increase in the number and volume of placements, especially against the backdrop of the expected reduction of the Central Bank’s key rate in the second half of the year.

As DOM.RF reported on the information disclosure website on February 16, the placement of this year’s first issue of mortgage bonds was completed – in the amount of 45.5 billion rubles. It is secured by Sberbank loans under government programs for the purchase of apartments.

Last year, it was Sberbank that set a record for the volume of mortgage bonds in one issue, placing securities worth 220 billion rubles. (see “Kommersant” dated December 20, 2023). The new issue was the earliest in the history of the Russian market – until now, until the beginning of spring, banks had not placed mortgage bonds. Sberbank did not respond to Kommersant’s request.

“Some banks postponed the placement of their issues last year, including debut ones, due to the sharply increased level of interest rates,” notes DOM.RF.

They explain that with the help of securitization, banks solve the problems of increasing the liquidity of assets, reducing credit risk, interest rate risk, increasing the return on capital, and raising funds to finance new issues.

During a period of declining market rates (the Central Bank allows for the possibility of reducing the key rate in the second half of the year), they add to DOM.RF, accumulated portfolios can ensure the sale of mortgage bonds to investors at a premium.

Andrey Korolev, executive director of the capital markets department at Sovcombank, believes that in 2024 “new names will appear in the securitization market and the number of placements will increase.” In 2023, the volume of mortgage securitization amounted, according to DOM.RF, to 669 billion rubles.

“This is an effective tool for managing capital and interest rate risk, and banks will certainly use the opportunities and potential of issuing such bonds,” explains Mr. Korolev. With a projected reduction in the key rate, he adds, market placements will make it possible to lock in profits from portfolios issued at high rates due to the possibility of selling them at more than face value.

Independent experts also see prospects for growth in the securitization market this year, primarily due to the expectation of a reduction in the key rate of the Central Bank.

“The main drivers of banks’ interest in securitization will be rates and the burden on capital,” says Alexandra Verolainen, managing director for structured finance ratings at Expert RA. She shares Mr. Korolev’s assumption that “with a reversal in the rate trend by the end of the year, an interesting opportunity may arise to sell matured high-yield loans issued during the period of high rates for securitization.”

At the same time, Ms. Verolainen clarifies, the yields on medium-term highly reliable bonds are already lower than deposit rates, against this background the bond market is becoming a more attractive source of funding for potential originating banks compared to expensive deposits. “In addition, banks’ interest in securitization stimulates the growth of capital consumption for both mortgage and consumer loans,” the expert notes.

This situation, according to Alexandra Verolainen, can create conditions for the emergence of new issues with the portfolios of both banks that already have experience in securitization and debutants. Until now, more than half of the placements of DOM.RF mortgage bonds took place under the portfolios of the largest market participants Sberbank and VTB.

In general, the share of loans securitized through DOM.RF at the end of the third quarter of last year amounted to only 6% of the entire mortgage portfolio of the banking sector, which means that the market retains significant potential for growth.

Maxim Builov