Credit Foncier de France SA is selling the first bonds backed by French residential mortgages since 2006 as regulators press for the revival of the securitized debt market to boost lending.
The mortgage lender, owned by Paris-based bank Groupe BPCE, is expected to sell the bonds following investor meetings beginning on April 22, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The deal is the bank’s debut issue of notes backed by prime mortgages.
France’s central bank Governor Christian Noyer is encouraging lenders to revive the market for residential mortgage-backed securities after stricter capital rules curbed lending. This is the second part of Noyer’s plan to use securitization to increase the supply of credit to businesses, with a program for packaging loans to small- and medium-sized businesses into bonds starting last week.
“French banks are facing pressure from Bank of France to make room on their balance sheets to provide financing to companies,” said Ratul Roy, head of European securitized products research at Citigroup Inc. in London. “Development of a functioning French RMBS market would be a valuable addition to the European securitized universe, where primary issuance has been dominated by U.K. and Dutch RMBS, and auto ABS during the past few years.”
French banks are restrained from expanding their balance sheets, which already hold about 1.5 trillion euros ($2 trillion) of corporate loans and residential mortgages, by Basel III’s leverage ratio requirement, according to Citigroup. That’s prompting policy makers to seek new ways to boost finance to SMEs, which employ 63 percent of private sector workers in France and are central to the country’s moribund economy, where unemployment is above 10 percent.
The last French RMBS deal was a securitization of guarantees on loans made by Credit Logement SA in September 2006, according to UniCredit SpA.
Credit Foncier is the lead arranger of its new deal, while Credit Suisse Group AG and BPCE’s Natixis SA unit are co-arrangers. Lloyds Banking Group Plc, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc are joint lead managers.
Credit Foncier’s transaction follows the first Italian RMBS since 2011, sold by Veneto Banca ScpA last week. The Montebelluna, Italy-based bank paid 115 basis points more than the euro interbank offered rate, down from the 120 basis points first indicated amid strong demand for the deal.
“With the first Italian deal in three years pricing at the tighter end of guidance this month, I expect to see similarly strong demand for a French issuer,” said Markus Ernst, an analyst at UniCredit in Munich.