Overall market conditions were challenging in the RMBS sector, but Lehman Brothers managed to improve its standing, claiming the top position among U.S. RMBS managers for the first three quarters of the year.
Lehman outsold second-place finisher Bear Stearns by a mere $3 billion, according to Thomson Financial. The bank brought 88 deals to the market in the first three quarters that totaled $76 billion and accounted for a 9.8% market share. Despite its move up from second place last year, the firm was down from the 10.6% piece of the market it maintained during the same time period in 2006 when it brought in $84.2 billion in issuance. Further, Lehman almost halved its quarterly volume in the third quarter of 2007, with $17.6 billion, compared with $30.5 billion in the third quarter of 2006.
Bear Stearns placed 81 deals totaling $73 billion, a decline from the $84 billion it raked in last year. The firm also had a slight drop in market share, to 9.3% of the market for the first three quarters of 2007, down from the 10.6% that it maintained in the first three quarters of 2006. Bear also took a hit in its third-quarter volume, which fell to $17.4 billion from $24.6 billion in the third quarter of 2006.
JPMorgan Securities jumped three notches to a third place position for the first three quarters of 2007, claiming an 8% market share with 72 deals totaling $63 billion, a rise in volume of roughly $8 billion from the same period last year, when the bank held a 7% market share.
Morgan Stanley rose six notches to fourth place, with 65 deals totaling $55 billion in the first three quarters. The bank secured a 7.1% market share, up from 5.6%, with $44 billion in issuance, for the same period in 2006.
Rounding out the top five was Credit Suisse, whose 78 issues totaled $52 billion in business. Credit Suisse claimed a 6.7% market share for the first three quarters of 2007, a drop from the 7.6% it had during the same period last year.
Other notable declines included Banc of America Securities and Royal Bank of Scotland, which moved to sixth from eighth and to seventh from third, respectively. Banc of America took a 6.2% market share for the first three quarters of 2007 with 72 issues totaling $48.4 billion. Notably, the bank's issuance volume was similar to last year's, with $48.2 billion for the same period in 2006. Royal Bank of Scotland completed 57 deals, which represented $46 billion in RMBS volume, and held a 6% market share. That was significantly lower from the previous year's performance, when the bank issued $70 billion with an 8.9% market share.
Goldman Sachs dropped to 10th place from seventh, with 48 deals totaling $39 billion and a 5.1% market share. This was down from $52 billion in issuance with a 6.5% market share one year ago.
No Help from the Fed
The recent cut in interest rates was not enough to alleviate the ongoing suffering in the agency/nonagency U.S. RMBS markets in the third quarter, especially in the face of slowing home price appreciation and tighter underwriting standards that eventually dampened RMBS issuance volume.
RMBS issuance was down every whichway. Compared with last year's third quarter, RMBS issues dropped to $168.8 billion from $252.2 billion, according to Thomson. On a monthly basis, agency and nonagency production was a paltry $7.1 billion in September, down from $27.7 billion in August, according to Dealogic, a global research firm. Compared with September 2006, total RMBS was $84.2 billion.
Year-to-date issuance was slightly lower, too. New issuance amounted to $784 billion in the first three quarters of 2007, compared with $795 billion for the same period in 2006, according to Thomson. By the end of September 2007, 932 deals had come to the market, compared with 1,098 last year.
Looking ahead, there is good news for GSEs, which are expected regain some market share as many of the agency eligible loans -- Alt-A, in particular, and even subprime -- have begun to be routed through the agencies, JPMorgan Securities analysts said in a recent report. At the same time, the move towards fixed-rate loans from ARMs and the legislation to raise FHA and GSE loan limits will increase the supply to the fixed-rate agency segment. The bank noted that nonagency production, which accounted for more than 50% of securitization volume in 2006, is down to an estimated 40% for all of 2007 and should fall even further next year. The bank expected the agency MBS market share to exceed 70% or even return to the 80% level that it maintained in 2002 and 2003. With a 75% market-share baseline estimate, gross agency issuance will top $1 trillion in 2008, the bank said.
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