(Bloomberg) -- Banco Santander SA wants to offload more risk to private investors as it seeks to free up capital.
The bank is looking to speed up transactions that transfer risk to investors such as private credit firms, Santander’s global head of capital and profitability management, Sergio Gámez, said in a presentation to analysts earlier this month.
Such transfers could take the form of asset sales, guarantees or securitizations, according to the presentation, which was seen by Bloomberg News.
A spokesperson for Santander declined to comment.
Lenders globally are increasingly seeking to share risk in their loan books as regulations make it costly to keep it, while buy-side firms that aren’t subject to those rules are looking for opportunities to invest. Santander is at the forefront of this shift. It’s one of the most active banks in the market for synthetic risk transfers, and a staple in the structured markets, which repackage debt into securities of varying risk and size.
In the first half of this year, the Spanish lender moved around €30 billion ($33 billion) of risk off its books, equal to what it was able to offload in all of last year, according to the presentation. It has sold a portfolio of non-performing mortgages to Hoist Finance AB, and has been gauging investors on a string of synthetic risk bonds tied to Mexican and Brazilian debt portfolios, Bloomberg previously reported.
Gámez leads Santander’s global asset desk, which focuses on ways to shed risk tied to loans and reinvest the freed-up capital more profitably. The goal is to increase the turnover of assets on the bank’s balance sheet and shift to a business model that makes more money from fees and consumes less capital, according to the presentation.
“Around one third of the bank’s balance sheet can be rotated every year,” JPMorgan Chase & Co. analyst Sofie Peterzens wrote in a note earlier this month. If “managed effectively through securitizations and other capital rotations tools, this can release up to 15 basis points CET 1 per quarter.”
Gámez highlighted the growth of private credit as key opportunity to step up risk transfers. Many of the transfer deals the bank is looking to strike are in the asset-based finance market, where debt is backed by a borrower’s assets, like auto loans or equipment leasing debt.
©2024 Bloomberg L.P.
