Absa Bank, one of South Africa’s leading banks, today defied the global credit market worries with a successful R3.225bn launch of its Home Programme Series 1 home loans securitisation programme.
Paul Bowes, Head of Group Funding & Liquidity Management at Absa Bank said the issue was 1.23 times oversubscribed with total bids received of nearly R4bn.
“The decision to proceed with the transaction was not taken lightly, given the recent credit market turmoil that was triggered by losses in the US sub-prime home loan market,” said Bowes.
“But it was encouraging how strong the demand for this paper was given that the troubles we’ve seen in mortgage markets abroad. Its success reflects the strong confidence in the South African banking industry and level of conservativeness in its lending criteria that people are so keen to take up this paper in the face of a global credit crunch.”
The issue was broadly taken up by South Africa’s leading fund managers and local investors.
“These credit spreads achieved have taken account of the credit worries but overall we are very pleased with the price achieved.”
Absa Capital issued AAA 3 Year Notes at 45 basis points credit spread over Jibar and 5 year AAA notes at 50 bps over 3 month Jibar.
Bowes noted that so far the sub prime fallout has had little impact on Absa’s business, nor had it dampened investor demand for home loan securitisation investment in South Africa.
Gavin Opperman, Managing Executive of Absa Home Loans said: “We are satisfied with the outcome of this inaugural issue from HOMES.
“The good result of the issue is also indicative of Absa’s market leading position in the South African residential mortgage market and the good standing that it has in the market for sound lending practises and building long-term relationships with its customers.”
The Home Programme Series 1 issuance falls under Absa Bank’s R20bn securitisation programme through which the bank has issued securitised home loans and instalment sales agreements.
In future, Absa Bank will be looking at securitising parts its credit cards and commercial property finance portfolios.
So far Absa Bank has issued over R8.5bn rand of securitised assets over the last year as part of our key strategic initiative for to diversify our funding base to support asset growth.
Note to the editor:
About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays Capital, is a leading South African investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.