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FUTURE TRENDS IN ITALIAN ABS. Marco Grimaldi, Dresdner Kleinwort Barcelona, 11 June 2007. What’s happened to those good old BOT people?. well… they’ve become ‘impatient’…. 50. Source: Osservatorio Assofin-Crif-Prometeia. 43.4. 45. 39.6. 36.4. 40. 34.6. 32.8. 35. 30. 25. 38.1.

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future trends in italian abs

FUTURE TRENDS IN ITALIAN ABS

Marco Grimaldi, Dresdner Kleinwort

Barcelona, 11 June 2007

well they ve become impatient
well… they’ve become ‘impatient’….

50

Source: Osservatorio Assofin-Crif-Prometeia

43.4

45

39.6

36.4

40

34.6

32.8

35

30

25

38.1

34.1

30.6

28.4

20

26.3

15

10

5

6.5

6.2

5.8

5.5

5.3

0

2001

2002

2003

2004

2005

st household debt

m/l household debt

which means the italian consumer market is still very attractive
… which means: the Italian Consumer market is still very attractive

Fonte: Il Sole 24 Ore

Fonte: Il Sole 24 Ore

but it is changing rapidly
…but it is changing rapidly
  • Mortgage Loans
    • self-certified, low DTI, high LTVs
    • liquidity loans
    • capped/discounted/fixed rate loans
  • Unsecured Retail Credit
    • pension-secured personal loans
    • quasi-prime borrowers
    • non-prime borrowers (credit impaired)

Low Risk

High Risk

perspective on the italian sub prime mortgage market a reality1
Perspective on the Italian Sub-Prime Mortgage Market: a Reality?
  • Main drivers:
    • Potential dimension and transparency of the sub-prime market
    • Lender’s risk attitude and origination channels
    • Legal and economic framework
consumer loans the market
Consumer Loans: The Market

Total Consumer Loan Stock in € bln

100

89.9

Source: Osservatorio sul credito al dettaglio Assofin-Crif-Prometeia

90

76.5

80

70

63.3

55.0

60

48.3

€ bln

50

40

30

20

10

0

2002

2003

2004

2005

2006

  • Favourable interest rate environment
  • Adequate risk-return profiles
  • Diversification of the funding sources
  • Enhanced efficiency of the loan origination procedures
  • Diversification of funding channels through networks and wholesalers in partnership
consumer loans typical financing structure of italian lenders
Consumer Loans: Typical Financing Structure of Italian Lenders

Scenario 1

(small lender)

Scenario 2

(medium/large lender)

1%

9%

36%

25%

30%

99%

Securitisation

bank loans

secured loans

Outright sale

Outright Sale

s/t facilities

consumer loans typical securitisation structure
Consumer Loans: Typical Securitisation Structure

ABS Issue

Portfolio

Transfer

Originator

SPV

ex lege 130/99

Capital Markets

2

1

Collections

Fixed-to-floating Swap

Servicing

4

3

5

Investment Bank

Originator/

Servicer

Loan

Portfolio

Collections

4

Swap

back-to-back

5

MAIN ISSUES FOR SMALLER LENDERS

Originator

1

Minimum size to execute an efficient public securitisation

Liquidity of the ABS issue

2

Servicing track record and availability of data for the life cycle of the product

3

Collection procedures vs. requirements of the rating agencies

4

Hedge management and accounting

5

consumer loans main hurdles and solutions
Consumer Loans: Main Hurdles and Solutions

MAIN HURDLES

POSSIBLE SOLUTIONS

Minimum size to execute an

efficient public securitisation

warehouse

1

fungible issues

Liquidity of the ABS issue

2

back-up servicer and credit scoring

Servicing track record and availability of data for the life cycle of the product

3

Advance Facilities and Guarantees

Collection procedures vs. requirements of the rating agencies

4

Balance Guaranteed Swaps,

Hedge Accounting

Hedge management and accounting

5

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