European securitisation update
Surges in Q1 2025, Driven by CLO Boom and RMBS Momentum
European securitisation markets kicked off 2025 with their strongest first-quarter performance since the global financial crisis, according to Morningstar DBRS. Investor demand, particularly for broadly syndicated loan (BSL) collateralized loan obligations (CLOs), propelled the distributed issuance to €38.3 billion—up 19% from Q4 2024 and 28.4% from the same period last year.
In total, Q1 2025 securitisation issuance reached €67.5 billion, 5% higher than the previous quarter, although still 8% below Q1 2024 levels.
“The European securitisation markets started the year on a solid footing, carrying momentum from Q4 2024,”
noted the Morningstar DBRS team led by Mudasar Chaudhry, Senior Vice President.
CLOs Dominate as Structured Credit Skyrockets
Structured credit was the standout category, surging 82% quarter-over-quarter to €27.8 billion. This was largely fuelled by a single €10 billion SME CLO deal and a record-setting €17.6 billion in BSL CLO issuance. Morningstar DBRS confirmed this marks the highest quarterly volume for European BSL CLOs post-GFC.
Excluding CLOs, distributed issuance still climbed 11.2% to €20.8 billion, showing continued appetite for traditional ABS and RMBS products.
RMBS Remains Core Despite Dip
Residential mortgage-backed securities (RMBS) maintained their dominance, accounting for 43.1% of total issuance at €29.1 billion. Although this represented a 13.7% drop from Q4 2024, the segment remains foundational—especially in the UK, which led RMBS issuance with €12.1 billion across 17 deals.
Auto and consumer ABS volume slipped 42.3% to €7.9 billion, while commercial mortgage-backed securities (CMBS) made a surprise rebound, hitting €2.2 billion—almost matching all of 2024’s CMBS output.
Regional Trends: Belgium Surges, UK Holds Ground
Cross-border European deals led the way, particularly 39 BSL CLO transactions worth €17.6 billion. Belgium jumped to second place in total issuance with two jumbo retained deals worth €14.5 billion. The UK held third, focused on RMBS.
Notably, there was no issuance activity in Q1 from Switzerland or Cyprus, countries that had featured in prior years.
ESG and STS Activity Remains Modest
Securitisations verified as Simple, Transparent, and Standardised (STS) made up 28% of Q1 volume, led by RMBS. Only one green-labelled deal emerged: a €0.5 billion RMBS transaction from Obvion-Green Storm 2025 B.V., underscoring the slow pace of ESG-labelled securitisations.
Outlook: Resilient Amid Trade Tensions
Morningstar DBRS projects full-year issuance between €205 billion and €210 billion, with distributed volumes expected to make up 65–70%. While macroeconomic conditions and potential trade conflicts pose downside risks, structured finance transactions generally remain robust due to features like deleveraging and amortisation.
“Our performance outlook on all other sectors in UK and European jurisdictions expects limited movement,” the report states, confirming stable credit ratings across most categories—aside from the office CMBS segment, which continues to face negative outlooks due to weak demand and shifting workplace trends.
Conclusion
With investor-placed issuance accelerating and CLOs setting records, 2025 has begun on a bullish note for European securitisation. Yet, uncertainties around trade policy and regional macro trends could test this momentum. Still, Morningstar DBRS remains confident in the sector’s structural resilience and expects continued strong performance through the year.
Higher Tariffs may affect EU Banks' CoR
As global trade tensions resurface, European banks may no longer be able to count on the ultra-low cost of risk (COR) that characterized the post-pandemic recovery. In its April 2025 commentary, Higher Tariffs Could Increase European Banks' Low Cost of Risk, Morningstar DBRS warns that mounting tariff uncertainty—especially involving U.S. trade policy—could pressure banks to increase provisioning and reassess exposure to vulnerable sectors.
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Relevant Links:
https://dbrs.morningstar.com/research/453058/quarterly-european-securitisation-issuance-report-q1-2025
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