The Resurgence of Securitisation

2007 was the year that securitisation in South Africa reached its peak, with a value of about R40 billion in issuances.  Then the financial crisis struck and the process become almost non-existent. More recently, with the continued recovery from the crisis, securitization has begun to gain momentum. According to a story in Business Report, the value of securitization issuance by the end of 2011 is estimated at R20 billion, while in 2012, volumes should reach R25 billion.

In 2011 so far, Standard Bank has acted as the sole lead arranger in various securitization deals valued at about R9 billion, R7 billion of which is in the housing finance space. These deals include:

SA Home Loans – The Thekwini Fund 9 –Series 1 (July 2011)

Blue Granite – Blue Granite Investments No.2 (August 2011)

SA Home Loans – The Thekwini Fund 9 – Series 2 (October 2011)

Blue Granite – Blue Granite Investments No. 3 (October 2011)

There are several benefits for securitization, for the investor for example, it presents a stable prospect for a good return. While for the recipients of this form of financing, it is a way to diversify funding sources and investors, and in the process it lowers the overall cost of capital and funding risk. The current trend in deals is an indication that investors in the capital markets are keen to invest in the credit risk of the housing market.  As securitization is the main funding mechanism used by SA Home Loans, the resurgence of securitization indicates more business for the company, which in turn means an increase in the home loan disbursement activity for the sector., With the implementation of Basel III, securitisation is expected to gain more prominence in the future as it will ensure the diversification of asset classes needed to provide long term funding, which is one of the capital requirements of Basel III