Deals backed by loans to Belgian small businesses will be among Europe’s strongest performers, according to Moody’s Investors Service.
"Belgian small businesses are growing and deleveraging, improving their profit margins," explained Monica Curti, a Senior Credit Officer at Moody’s.
"Better financing conditions are helping business investment. It’s down to a combination of low interest rates, rising consumer confidence, and households are more comfortable with spending," noted Curti.
Moody’s research says arrears and default indicators in Belgian SME transactions are below the average in Europe. The performance of Belgian transactions has been strong since 2009; the 90-360 day delinquency rate out of the current balance is below 1%, compared with an average of 1.48% in EMEA, as of December 2015. At the same time, the 90-360 day delinquency rate on original balances for Belgian transactions is below 0.3%), compared with 0.59% for the EMEA average, according to the latest data. For Belgian transactions, the weighted-average cumulative default rate stood at 1.56% as of December 2015, compared with 3.89% for Spain and an average of 5.92% for EMEA. The Belgian rate is in line with the lowest SMEs non-performing loans ratios recorded in Europe.
Moody’s attributes the strong performance of Belgian asset-backed securities to lenders’ strong eligibility criteria and the low indebtedness of Belgian companies compared with their European counterparts. Since the financial crisis, Belgian SMEs also have had relatively low refinancing risk and benefitted from some economic growth, although growth still remains somewhat sluggish. The number of companies has increased during the last decade, despite the macroeconomic downturn.
Belgium is the second largest market in EMEA for SME balance sheet securitisations by volume. Three deals account for the total outstanding loan pool in the Belgian SME ABS market: Esmee Master Issuer N.V. –S.A. Series 0-2009-I, which currently is the largest European ABS SME transaction (EUR 9.99 billion), Belgian Lion SME II (6.37 billion) and Mercurius Funding NV/SA (2.74 billion).
In keeping with the highly concentrated Belgian banking system, the volume of the three transactions currently amounts to about EUR 19.1 billion. Belgian SME balance sheet securitisations are highly concentrated compared with other markets with similar size by volume in Europe, such as Spain and Italy, which have 40 and 31 outstanding transactions, respectively.
