The synthetic securitization frames into a global trend. Market participants may carry on 30 – 35 billion US Dollars issuance in 2025
UniCredit is working on a Significant Risk Transfer (SRT) deal that involves a portfolio of German corporate credits worth 4 billion euros which is 7% of the bank’s total loans, Bloomberg reported pointing out that the operation could close in 1Q25.
The newswire added that also UniCredit Bulgaria is working on a smaller SRT for a corporate credits’ portfolio. In 2024, the bank’s Czech Republic and Slovakian subsidiaries closed aSRT for a 1.7 billion euros portfolio. However, rumours say that UniCredit is also working on similar operations for factoring contracts.
The synthetic risk transfer that occurs through a synthetic securitisation transaction is the most popular SRT. This kind of operations allows the bank to retain ownership of the credit exposure by selling a protection contract on a portion (5-15%) of the pool of loans that regard the transaction for covering the first possible losses. The counterparties are usually pension funds, insurance companies, sovereign wealth funds and hedge funds. In this way banks can free up regulatory capital, while investors can get attractive returns (see here Occasional Paper – European Systemic Risk Board).
June 2024 S&P Global data say that Barclays (60 billion euros worth of assets) and Santander (little below 60 billion) carried on the major SRT deals. BNP Paribas, Deutsche Bank and Intesa Sanpaolo (less than 30 billion) an Unicredit (in the region of 15 billion) also carried on relevant SRTs that involved mainly corporate credits.
Market participants expects the SRTs volume to further increase in 2025 as USA authorities are close to implement the Basel III Endgame regulatory framework that will increase the banks’ capital requirements (see here the reports of PwC and EY). Chorus Capital Management, an investor in SRT tranches, the issuance related to this kind of operation could reach a global amount of 30-35 billion US Dollars (29 billion in 2024). Between 2023 and 2024, the total volume of ongoing SRTs increased from 50 to 70 billion (+40%). Pemberton Asset Management expects the global ongoing SRTs to be worth 130-150 billion by 2030.
Private debt investors are therefore launching vehicles for SRTs. In 2024, Chorus Capital and AXA IM Alts raised both 2.5 billion for SRT funds while at least four firms set a target of above one billion for their vehicles, With Intelligence reported.
