The first securitization deals in Russia were made before the crisis hit, which forced many banks to put their mortgage bond plans on hold. Recently, however, banks have been showing renewed interest in the funding instrument. VTB 24 and KIT Finance paved the way for the Moscow Bank for Reconstruction and Development, National Reserve Bank and Absolut Bank, who have all decided to follow suit and securitize their mortgage portfolios.
Similarly, Vozrozhdenie Bank is considering a securitization option for 2011, as Alexander Dolgopolov, deputy chairman of the bank’s management board, told RBC Daily. The bond issue may be as high as RUB 5bn (approx. USD 160.88m) – more than half of the bank’s total mortgage portfolio of RUB 8bn (approx. USD 257.4m). “We may issue mortgage bonds in order to keep long-term assets and liabilities balanced. If we carry this rate of increasing our mortgage portfolio into the next year, we will be able to securitize some of the portfolio,” Dolgopolov explained.
The Moscow Bank for Reconstruction and Development and the National Reserve Bank are getting ready to make a joint issue of mortgage bonds in 2011. The banks signed a cooperation agreement back in July, and the parameters of the deal have now become clear. “The bond issue will amount to RUB 3bn (approx. USD 96.53m), with the securitization scheduled for the first quarter of 2011,” Maxim Korotkin, head of the asset securitization department at the Moscow Bank for Reconstruction and Development, said. He went on to specify that the partners were not planning a large issue because they wanted to test the market first: no joint placements have ever been held on the market before. “Joint securitization will permit medium-sized banks to use the instrument efficiently and cut their expenses involved in bond issues and the further maintenance of such deals,” Korotkin opined.
Absolut Bank intends to revisit its securitization plans as well. In September 2009, the bank’s management announced an upcoming mortgage bond issue, with the placement due in the beginning of 2010. The plans were later canceled, which Absolut Bank attributed to excess liquidity in the banking sector. “We have not discarded the idea altogether, and our funding strategy provides for a mortgage bond issue. Yet, the transaction will not be held until the second half of 2011 as our demand for external funding rises,” head of Absolut Bank’s investment and trade department Sergei Mikhailov said. The issue will be no less than RUB 6bn (approx. USD 193.05m).
KIT Finance and VTB 24 were the first to come public with their securitization plans. KIT Finance is contemplating an issue of RUB 43bn (approx. USD 1.38bn) in late 2010 – early 2011, while VTB 24 is poised to float mortgage bonds worth RUB 15bn (approx. USD 482.63m) by the year-end.
