This year will not set any records for investor-placed covered bonds. After moderate-to-strong activity for most of the year, issuance in June was the slowest in over 10 years. But we still believe our projected volume of EUR 170bn for 2024 is feasible.

The new structured finance methodology is specific to residential mortgage-backed securities, mainly in Europe.

There is less than six months to go until the property value in the updated Capital Requirements Regulation takes effect. This could have a notable impact on covered bonds as market values are directly linked to the amount of bonds that can be issued.

Interest-rate cuts boosting loan demand and improving net interest margins were supposed to drive French banks’ performance in the second half but political uncertainty has put investment decisions on hold while mortgage demand was already hesitant.

The review and revision of EU supervisory practices to enhance their effectiveness is positive for the banking sector. While progress is being made to strengthen the regulatory framework, some banks may struggle or be unable to adapt to new requirements.

Credit risk remains high in Europe’s retailing sector this year, particularly in the discretionary goods segment, with no sign that the rising trend of business failures from last year will reverse in 2024 after defaults rose in the first quarter.

Despite expectations of a modest economic rebound in the euro area in the second half of 2024 aided by expected rate cuts and even more so in 2025, NPL formation will likely continue to rise moderately. We forecast euro-area GDP growth of 1.0% this year.

Italian NPL collections of EUR 208m in May 2024 were 12% up month-on-month but 15% below the May average of the last two years owing to a 29% decline in DPOs.

The persistent negative rating drift in place between the fourth quarter of 2021 and third quarter of 2023 continues to recede. The upward shift is mainly due to reduced rating pressure on CRE/CMBS and secured NPL transactions.

Losses to senior noteholders of the Elizabeth Finance 2018 CMBS resulting from the sale price of the properties securing the Maroon loan was an idiosyncratic outcome. It may not be a unique outlier but will not trigger wider market turbulence.