1Q ABS Issuance Down 1.8%... PF Loan-Backed Securities Base Plummets in One Year

The registered issuance amount of asset-backed securities (ABS) in the first quarter of this year decreased by nearly 2% compared to the same period last year. While mortgage-backed securities (MBS) and non-performing loan (NPL)-based ABS increased, real estate project financing (PF) loan-based ABS declined.

According to the Financial Supervisory Service on the 18th, ABS registered and issued in the first quarter amounted to 10.7 trillion won, down 1.8% from the same period last year.

By asset holder, issuance by Korea Housing Finance Corporation and financial companies increased compared to the same period last year, but issuance by general corporations decreased. Korea Housing Finance Corporation issued 7 trillion won of MBS, an increase of 700 billion won (10.8%) compared to the same period last year.

Financial companies issued 2.4 trillion won of ABS, up 100 billion won (5.9%) from the same period last year. Banks issued 600 billion won, an increase of 300 billion won (82.8%), based on NPLs, and securities companies issued 900 billion won of primary collateralized bond obligations (P-CBO) based on corporate bonds, up 100 billion won (5.3%). Specialized credit finance companies issued 900 billion won, down 200 billion won (22.4%), based on card receivables. General corporations issued 1.2 trillion won of ABS, based on installment payment receivables for devices, down 1 trillion won (45.4%) from the same period last year.

By securitized underlying assets, loan receivable-based ABS issuance increased by 100 billion won (1.1%) to 7.7 trillion won compared to the same period last year. MBS issuance rose by 700 billion won (10.8%) to 7 trillion won, and NPL-based ABS issuance increased by 300 billion won (99.1%) to 700 billion won.

Receivables-based ABS issuance decreased by 300 billion won (13.4%) to 2.1 trillion won. Card receivables-based ABS declined by 800 billion won (69.0%) to 300 billion won, and corporate receivables-based ABS decreased by 100 billion won (5.5%) to 1.2 trillion won. On the other hand, installment and lease receivables-based ABS issuance surged by 400 billion won (928.3%) to 500 billion won. P-CBOs based on corporate bonds increased by 100 billion won (5.3%) to 900 billion won.

MBS issuance increased from 6.3 trillion won in the first quarter of last year to 7 trillion won in the first quarter of this year. The issuance amount surged last month due to MBS issuance related to the Safe Conversion Loan applications last year. PF loan receivable-based ABS issuance showed a declining trend, plummeting from 500 billion won to zero during the same period. The Financial Supervisory Service explained, "Due to the contraction of the PF market caused by uncertainties in the real estate market, there was no issuance demand in the first quarter, resulting in a sharp decline in issuance performance compared to the same period last year."

ABS issuance by specialized credit finance companies also decreased from 1.1 trillion won to 800 billion won during the same period. This is interpreted as a result of reduced funding demand through securitization by specialized credit finance companies due to the recovery of bond market conditions such as the decline in specialized credit bonds interest rates in the first quarter of this year.