The Securitization issuance in Europe is expected to remain high, standing at €135 billion in 2025, thanks to an increasingly broad base of originators and sponsors, better prospects for most underlying lending areas and greater market involvement by originator banks, driven by financing needs and risk transfer.
He writes it S&P Global Ratings in the 2025 outlook on the European structured finance segment, published today, “European Structured Finance Outlook 2025: Up In The Air“, which found that structured finance ratings have mostly resisted the effects of higher interest rates, remaining largely stable over the past year, especially at investment-grade levels.
Bank financing
The end of central banks’ low-cost term financing programs is likely to support continued growth in the supply of bank-sourced securitisations in 2025, especially in the UK, where many loans mature towards the end of the year. That said, the recovery of deposit growth will reduce the need for wholesale financing of banks.
Consumer
Inflation is almost back to target levels, monetary policy interest rates are falling and real incomes are rising. However, they may persist performance pressures of collateral in securitizations linked to consumer creditespecially for borrowers with deteriorated credit profiles and in sectors where rate increases are still impacting loan agreements.
Corporate
For corporate transactions, the credit outlook is improving due to easing financing conditions and we expect the default rate of speculative-grade rated firms to begin to decline in 2025. The sector commercial real estate continues to face refinancing risks, even as property values appear to have bottomed out.
Rating trends
Structured finance ratings have mostly resisted the effects ofincrease in interest ratesremaining essentially stable over the last year, especially as regards the investment-grade category.
Regulatory developments
2025 could represent a particularly relevant year for regulatory developments in the European securitization markets. Among the topics to monitor are: legislative proposals arising from the European Commission’s recent consultation on the EU regulatory framework for securitisations and the implementation of the Basel III update (Basel 3.1) in the European Union.
