VTB Sees MBS Market Growing 28% in Russia Amid Pension Overhaul
Primary market for mortgage-backed securities in Russia may rise to RU165b in 2014 after growing 56% in 2013, Andrey Suchkov, head of securitization at VTB Capital, says in Bloomberg interview.
Mortgage lending penetration in Russia is equivalent to ~4% of GDP vs ~80% in Europe; penetration of consumer lending is similar; “A number of banks are wrapping up their consumer lending programs and focusing on mortgages”.
Only 10% of mortgages are financed by MBS with 99% of loans issued at fixed rate, making banks take “very high interest-rate risks”
State’s decision to channel all pension money into pay-as-you-go system in 2014 is “very negative event for us,” state pension manager VEB has announced it’s wrapping up its MBS investment programs.
VTB’s 2014 forecast is “still positive” as “there’s momentum and the process will continue”.
VTB Group helped organize 12 out of 19 MBS deals in 2013;Agency for Housing Mortgage Lending, VEB remained main investors, “but there were purely market deals” with non- state pension funds, asset managers.
Foreign investors are looking at Russian ABS deals as they “search for yield”; no public deals yet, only pre-placed club deals, or private placements
Main obstacle for cross-border securitization is “expensive” FX hedging, as 99% of mortgage, auto, consumer loans in Russia now are RUB-denominated.
Securitization law passed in 2013 makes it possible to issue securities backed by assets other than mortgages; deals will be started in 2014, probably concluded next year.
VTB Capital has “several mandates” for debut CMBS deals, “but it’s very labor intensive. The first deal can take up to a year”.