Securitisation sector view: London hires and pays over Europe

In the first nine months of 2005, issuance of securitised debt rose to record levels, according to Dealogic, the information provider. Although traditional securitisations backed by car loans and credit card payments faltered, growth was more than compensated by mortgaged backed securitisations, which rose 23% to 538bn, fuelled by the steaming global housing market.

But the hottest segment of the securitisation sector is commercial mortgage-backed securitisations (CMBS), backed by payments on commercial mortgages. While the traditional asset-backed sector (ABS) is mature in Europe and the US, the CMBS market is a relative spring chicken, particularly in new markets like Germany. Little surprise therefore that it's a growth area for the likes of HSBC and Barclays Capital.

UK and US: Hiring across asset classes

As in most areas of financial services however, it's the UK and the US where pay for securitisation professionals is at its most awe-inspiring.

Clare Harris, a director at recruitment firm Alexander Mann Financial Markets in London, says VPs in London-based securitisation teams who focus on CMBS can expect to earn as much as 300,000 in total. Peter Arian, managing director of Analytic Recruiting in New York, says US VPs can expect anything from 142,000 to 370,000.

Size is the deciding factor. The UK generated nearly half all residential MBS issued in the first half of 2005, and accounts for over half the collateral on outstanding European CMBS. European CMBS issuance, which hit 14.1bn last year, continues to lag the US, however, where bankers are expecting issues of 14.4bn in August alone.

Recruiters in both countries say hiring is strong, particularly for more complex collateralised debt obligations (CDOs), which allow banks to distribute tranches of securitisations according to risk.

"We're seeing continued interest across all asset classes, but particularly for credit- related areas like CDOs and new products like collateralised fund obligations" says Arian. "People are venturing up the credit curve a little."

"Banks are looking at more esoteric asset classes and CMBS products," says Harris. "There has been a growing trend to establish separate real estate groups, within which CMBS teams are being built quite aggressively."

Barclays Capital, Deutsche Bank, and CSFB have all boosted London securitisation teams this year. HSBC announced plans to launch a European CMBS conduit in September. BNP Paribas and Barclays Capital have both made high profile hires in the US.

Arian says US securitisation specialists should be paid well compared with last year. In London, Harris predicts static pay in the mature ABS sector, but says bonuses should rise 20% in the hotter CMBS arena.

Germany: Keen interest

Recruiters report keen interest in staff to work the growing German market.

"It's a very active area," says Oezcan Acikel, a securitisation specialist at Frankfurt search firm Smith & Jessen, "Most banks are hiring. It's not exactly a boom, but everyone seems to be looking to add one or two in extra headcount."

Germany's market is being fuelled by changes to the country's regulatory framework, allowing overseas investors to refinance the non-performing loan portfolios of its banks via mortgaged backed securitisations. BNP Paribas, Barclays Capital are among those recruiting.

Pay is marginally higher than Italy. Acikel says a Frankfurt-based junior VP working with real estate-backed securitisations can expect to earn 206,000 to 345,000 in total compensation, of which 68,000 should be a bonus.

France: London calling

French securitisation specialists are more likely to find themselves based in London than Paris. French banks like Société Générale, BNP Paribas, and Calyon play a key role in the market, but recruiters say they typically split teams 50-50 between London and Paris.

Jean Turcat, a recruiter at Robert Walters in Paris, says this is changing as banks move a growing number of originators and structurers in France to deal with the expanding French market. According to Standard & Poors, for example, asset backed securities issuance in France more than tripled in the first half of 2005 vs. the first half of 2004.

Denis Marcadet, managing director of Parisian search firm Vendômes Associés, says VP-level securitisation specialists in the French market can expect to earn up to 150,000, based on a salary of 55,000 to 82,000 and a 120% bonus.

Italy: Rising star

Italy's securitisation market is a comparatively youthful beast. While US organisations have been securitising their revenue streams for the past two decades, Italian securitisations date back only to 1999.

However, Italians are making up for lost time. Ratings agency Standard & Poors says Italy dominated the European asset-backed securitisation market in the first half of 2005, accounting for 3.2bn of deals, 38.4% of the European total.

Significant deals are in the pipeline: Gestore della Rete Trasmissione Nazionale, the Italian grid operator, is expected to securitise 1bn to 2bn of client debts before the end of the year. Meanwhile, the Italian government is expected to lend momentum to the country's mortgaged backed securitisation market, with significant sell-offs of state property expected in the next few years.

Recruiters say hiring in Italy's securitisation market is limited, with most international banks basing Italian teams in London. Italian banks are late to the party: Unicredito launched its first residential mortgage backed securitisation only in April 2005, for example.

Nevertheless, Tracy Turton, a partner at search firm Horton International in Milan, says Italy's banks pay their securitisation specialists quite handsomely: a senior Milanese vice president (VP) working on securitisations can expect a base salary of 82,000 to 89,000, plus a 120% bonus; a junior vice president should hold out for 55,000 to 68,000 in base pay, plus up to 100% bonus.