KBRA UK (KBRA) releases its Sector Outlook for the European structured finance market in 2023.
The extreme inflation of 2022 will continue to impact collateral performance and issuance volumes in the European securitisation markets next year. In particular, as central banks combat high inflation with expected further interest rate hikes, a number of securitisation sectors will contend with more difficult financing conditions. In addition, the deceleration in growth across Europe, coupled with 2023's widely expected recessionary conditions, will also weigh on performance. Further, sensitivity to energy prices and energy transition objectives will be key to performance. On the positive side, the market approaches these challenges from a position of strength, with high, albeit decreasing, savings levels; low unemployment; and steadily positive growth in house prices and asset valuations over the last seven years.
Looking back to our Outlook from 2022 for the European structured finance sector, we believe the region now faces similar but growing challenges as the markets navigate a dynamic environment.
Key Takeaways
- Collateral performance is likely to deteriorate in 2023, with delinquencies expected to increase in sectors such as non-conforming loans, re-performing loans, and consumer credit.
- Unemployment levels are key drivers of transaction collateral performance. Borrowers have managed to weather higher inflation moderately well in 2H 2022, but if unemployment increases, it would have a greater impact.
- Interest rates and inflation are expected to hamper valuations of both residential and commercial properties.
- Issuance is poised to pick up over 2022 levels, which were heavily curtailed in 2H 2022, as regulations and the pullback of quantitative easing measures bring issuers to the market for funding.
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About KBRA
KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221206005865/en/
Contacts:
Gordon Kerr, Head of European Research
+44 20 8148 1020
gordon.kerr@kbra.com
Yee Cent Wong, Co-Head of Europe
+353 1 588 1260
yee.cent.wong@kbra.com
Kali Sirugudi, European RMBS
+44 20 8148 1050
kali.sirigudi@kbra.com
Killian Walsh, European Structured Finance
+353 1 588 1184
killian.walsh@kbra.com
Stephen Hughes, European CMBS
+44 20 8148 1004
stephen.hughes@kbra.com
Gabriele Gramazio, European Structured Credit
+44 20 8148 1001
gabriele.gramazio@kbra.com
Business Development
Mauricio Noé, Co-Head of Europe
+44 20 8148 1010
mauricio.noe@kbra.com
Miten Amin, Managing Director
+44 20 8148 1002
miten.amin@kbra.com
