Calabasas, Calif.-based Countrywide Securities Corp., from about as far from Wall Street as you can get, was the leading underwriter of new-issue ABS at the halfway mark of the year - the first time a captive broker-dealer underwriter has been top-ranked in the modern era of ABS. In a not-so-surprising twist, its lending unit, Countrywide Home Loans, is the leading issuer as well.
Bolstered by more than $35 billion in self-led supply, the specialty underwriter placed more than $37 billion of ABS in the first six months of the year. More than half of this supply - $20 billion plus - came in the second quarter alone, thrusting CSC past Citigroup Global Markets to the top seat. The firm has controlled 9.8% of the market so far this year.
Countrywide's first-half total is a sharp increase from its year-ago volume, when it had placed roughly $13 billion, good enough for ninth overall, with a 4.5% market share.
As an indicator of where supply has come from in 2004, Countrywide also becomes the first underwriter to top the league tables focused entirely on one asset class: real estate ABS. In fact, the firm only had two third-party lead mandates: one for Impac Mortgage and one for IndyMac Mortgage. CSC also led a transaction backed by collateral it had acquired from Encore Mortgage. Roughly 95% of its ABS underwriting in the first half came off its own shelf (including acquired principal finance collateral).
"Countrywide Securities has always been a significant player in mortgage ABS and as the sector has grown in relation to the market as a whole, Countrywide has grown disproportionately with it," said Countrywide Securities President Ron Kripalani. "This is evidence of our vertical integration with Countrywide Home Loans, which is the leading home equity originator over the first two quarters of this year."
Countrywide Home Loans was the leading ABS issuer by a surprisingly wide margin in the first half, besting the traditional leading issuer General Motors Acceptance Corp. (including mortgage unit GMAC-RFC) by $8 billion.
Countrywide "expects to continue at the current pace" in the second half of the year, Kripalani added, noting a focus on increasing third-party lead mandate business.
The No. 2 through No. 5 rankings are more typical of the market, with Citigroup Global Markets, Lehman Brothers, JPMorgan Securities and Credit Suisse First Boston rounding out the top five.
Traditional market leader Citigroup is roughly $1.5 billion behind Countrywide, having placed almost $36 billion in new-issue ABS, good for 9.4% of the market. Citi saw a significant dropoff in its traditional strength, credit card ABS, while taking the lead from rival JPMorgan's traditional strength, auto ABS.
Citi led just $4.6 billion of credit card ABS, only $3 billion of which came from Citibank N.A.'s Citibank Credit Card Issuance Trust. Citigroup did, however, sell more than $7 billion of auto ABS in the first half, representing nearly one-fifth of the entire sector.
Roughly $4 billion behind Citigroup sits Lehman Brothers, with $32 billion sold thus far this year, good for $8.4% of the market. Lehman's business dipped in the second quarter, with $13 billion of business versus $18.5 billion in the first quarter.
Oddly though, Lehman has not been the top underwriter in any particular sector. It is, however, sitting in the third spot in both mortgage ABS (with $23 billion) and credit cards (with $4.1 billion).
JPMorgan Securities is $1.5 billion behind Lehman for the fourth spot, having placed $30.6 billion in investors' hands. This total includes the underwriting credit given to Banc One Capital Markets, which it officially acquired last Thursday. The new entity now controls 8.1% of the market.
As a result of the Banc One merger, JPMorgan is currently the leading underwriter of credit card ABS, besting Citigroup by almost $6 billion. Bank One's Bank One Issuance Trust accounted for nearly $5 billion in credit card ABS throughout the first half. JPMorgan's underwriting volume declined as the merger closing approached, with just $14 billion (between the two entities) in the second quarter versus $16.5 billion in the first quarter.
CSFB turned up the heat in the second quarter, moving into the top five after finishing the first quarter in seventh. The underwriter has sold $30.5 billion of ABS to date, $18.3 billion of which came in the second quarter, and currently holds 7.8% of the primary market. CSFB was the second-most active underwriter in the second quarter, behind Countrywide.
Close on CSFB's heels are RBS Greenwich Capital, Merrill Lynch and Deutsche Bank Securities - each within $500 million of one another - with nearly $29 billion, and approximately 7.5% of the market each. Morgan Stanley, with $24.3 billion, and Banc of America Securities, with $23 billion, round out the top 10.
The 10 leading underwriters collectively control 78.5% of the total market, with 43.5% concentrated in the top five.
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