BBVA plans SRT linked to $5.4 billion of corporate loans

Angel Garcia/Bloomberg

BBVA SA is sounding out investors for a significant risk transfer linked to corporate loans, according to people familiar with the matter.

The bank is considering a SRT deal tied to a portfolio of about €4 billion ($4.7 billion) of corporate loans, said the people, who asked not to be identified because the matter is private. 

SRTs allow banks to essentially buy insurance on debt, enabling them to free up capital while keeping the assets on their balance sheets. The deals involve selling notes to investors, who absorb some of the potential losses if loans go bad in return for yields that frequently top 10%.

The terms of the potential deal are subject to discussions with investors, said the people. A representative for BBVA declined to comment.

BBVA created a unit dedicated to SRT transactions this year. Lenders globally are ramping up the use of these tools to shift credit risk off their balance sheets and help offset the expected increase in regulatory capital requirements.  

Last week, BBVA said it completed two significant risk transfers tied to €3.5 billion of loans. The first deal, known as BBVA Vela Consumer 2025-1, is linked to a portfolio of €2.5 billion of consumer loans, the lender said in a statement on June 27. The second, Galea 1, was a synthetic securitization of project finance loans originated by the corporate and investment banking arm of the bank and totaled €1 billion.

Earlier this year, BBVA tripled the size of the corporate loan portfolio linked to a significant risk transfer to €6 billion.

Global sales of SRTs are expected to grow 11% on average over the next two years, according to a recent Bloomberg Intelligence survey. Aareal Bank AG, Erste Group Bank AG, Standard Chartered Plc and ING Groep NV are currently discussing or finalizing such deals.