In what may be the closest asset-backed league table race in the history of Thomson Financial's rankings, No. 1 ABS underwriter Citibank/Salomon Smith Barney re-opened (essentially upsizing) a 2001 Citibank credit card deal for $500 million on New Year's Eve, to overcome Credit Suisse First Boston's $61 million lead it had established that very day, pricing a $223 million auto lease deal for Provident Bank.
The down-to-the-wire league table run is reminiscent of the 1996 year-end ABS rankings, when Lehman Brothers repackaged $2 billion worth of credit card ABS on Dec. 31 to nudge ahead of Merrill Lynch for the No. 1 spot: that year the two banks brought $24.48 billion and $23.26 billion, respectively (see ASR 1/6/97).
For 2001, Salomon closed the door with $49.232 billion in proceeds, just $439 million more than CSFB's $48.793 billion, according to Thomson. Those figures tally the U.S. public and 144A markets, including collateralized debt obligations. The two banks accounted for nearly 30% of the asset-backed market.
This marks Salomon's second consecutive year at the top, although the bank's lead has substantially lessened compared to prior sessions. For example, at the end of year 2000, Salomon brought about $48 million in ABS to market, a whopping $11 billion over the nearest competitor, JPMorgan.
Commenting on the year, Co-Head of Asset-Backed and Mortgage Finance William Grady said the bank was "pleased with the final results," adding it would "compete vigorously in 2002."
In the coming year, Grady noted the strategy would be "to remain focused on delivering the best execution and most innovation for our customers, 365 days a year."
CSFB runs a good race
"For last year, our story is breadth," said Joseph Donovan, co-head of global securitization at CSFB. "We did some structural innovations in home equities that we think quite highly of. We obviously were back with the Big Three autos, and we had the long MNBA and Capital One deals, a ten year and a seven year, which were nice trades."
Though the market has seen a few similar deals, the New Year's Eve Provident pricing is still an innovative tax-oriented auto leasing deal, essentially monetizing the tax benefits in auto leases.
Although the race for No. 1 was close, CSFB's long-standing argument has been that proceeds from captive issuers, such as Citibank's credit card unit, or Morgan Stanley's Discover Bank, do not accurately depict an underwriter's book of business.
"Clearly we won where it counts," Donovan said. "We won the most client business, and we don't count where we can't compete."
JPMorgan up and coming
JPMorgan made a devastating push into the league tables this year, bringing $43.4 billion for the No. 3 spot. Excluding CDOs, JPMorgan takes the No. 2 spot, with nearly $1 billion more than CSFB in non-CDO public and Rule 144A volume.
Although at the close of last year, JPMorgan stood at No. 2 in the ABS market with $37 billion, participants argued those numbers were misleading, as for the vast majority, if not all of year 2000, J.P. Morgan and Chase Securities were separate entities, although their yearend tallies were combined for a massive league table push.
The combination of the two firms was credited with creating synergies in both customer relationships and structural innovations, which cut across all asset classes, according to Andrew Dym, co-head of North American ABS for JPMorgan.
Dym credited the teamwork between the newly-merged entities for early successes with offerings from GMAC, Ford Motor and American Honda that gave the bank momentum right out of the box.
"The successful execution and distribution of these deals gained the support of some large frequent issuers," Dym said. This support remained throughout the year as JPMorgan managed the most auto paper in 2001, having sold approximately $13 billion of auto issuance.
JPMorgan hopes to build upon the strength of 2001, expecting a greater portion of a greater market going forward, aiming to hone in on about 15% share of total proceeds.
All in all, ABS groups at most banks benefited from the robust issuance last year, driven by weakened corporate credit and low interest rates. Volume rose to nearly $350 billion, up 13% from $308 billion in 2000, according to Thomson's tally.
While players see further growth, the market continues to mature, which will likely keep this year's numbers in line with last year's mid-$300 billion range.
"I think the volume will come close, maybe a slight uptick, but I think this is sort of the plateau," said CSFB's Donovan. "This is the run rate."