Technavio covers the market outlook and growth prospects of the structured finance market for 2016-2020. Based on product segmentation, the market is classified into asset-backed securities, collateralized debt obligations, and mortgage-backed securities.
Technavio’s research study segments the global structured finance market into the following four regions:
Europe: Largest structured finance market
In accordance with the latest market research report by Technavio, Europe had the largest market share for structured financing products in 2015. The European Central Bank (ECB) is pumping liquidity into the market to reduce pressure on issuers and to boost funding in the mortgage, auto, and credit card markets. Technavio analysts expect the European structured finance market to evolve different products, such as project financing tools.
Technavio’s lead research analyst Bharath K says, “Corporate borrowers are likely to undertake structured and secured financing techniques to avoid long-dated loans for large corporations as well as the top vendors. Also, many top vendors in the market are trying to amend and restructure structured finance swaps.”
There is low spread in ECB, which will become a viable tool to optimize banks’ balance sheets through regulatory risk transfers.
These technical conditions in the ECB securitization would help boost issuance volumes of small and medium enterprise (SME) collateralized loan obligations (CLOs). The use of leveraged loan CLOs should drive structural innovation that may ignite multi-currency transactions, thus fueling growth opportunities over the next five years.
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Technavio's report identifies the following companies as the top vendors of the global structured finance market:
- Bank of America Merrill Lynch
- Barclays Bank
- Citigroup (Citibank)
- Credit Suisse
- Deutsche Bank
- Goldman Sachs
- HSBC Global Asset Management
- JP Morgan Chase
- Morgan Stanley
Citigroup, UniCredit, and Wells Fargo are the other prominent vendors in the market highlighted in Technavio’s report.
Key trend boosting structured finance market in Europe: Increased issuance of structured finance products
The new research study by Technavio reports that asset performance and regulatory initiatives in the US and Europe have heightened the issuance of structured finance products. Similarly, two specific asset classes, credit cards and auto loans, are expected to rise over the forecast period.
“A strong focus on the European Central Bank’s asset purchase program should help restore investor confidence and help them diversify their portfolios. This should generate higher yield for investors over the next four years. We also expect the issuance of collateralized loan obligations and small and medium-sized enterprises to continue to grow in the coming years,” says Bharath K, Technavio’s lead research analyst.
A glimpse on structured finance
Structured financing refers to sophisticated, complex transactions that take place across global financial markets. Structured finance includes project financing, securitization, leveraged leasing, and structured risk transfers (embedded value securitization, catastrophe, and insurance linked securities). The structured financing market has been in continuous tumult as financial markets rise and ebb. Structured finance helps in the pooling of economic assets such as bonds, loans, and mortgages, as well as in issuing capital structure of claims or tranches that are prioritized against the pool of collateral assets.
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