Jacob Binnema has big plans for MUFG’s European ABS desk. When he was hired in mid-2022 to set up the team, the Japanese bank had no presence at all in the continent’s public ABS market.

Since then, his team have won several mandates and is now plotting a course to become a bigger, more regular player in Europe’s growing ABS market. This strategy rests on two pillars.

The first is to win mandates in mainstream sectors like credit card, consumer and auto transactions.

“The overarching theme of MUFG’s ABS platform today is granularity,” Binnema told Debtwire in an interview.

Such deals are often high quality and repeatable, he said. Toyota Financial Services’ Koromo UK 1 transaction last year and Finance Ireland’s recent auto ABS, for which MUFG acted as joint lead manager and arranger, are both a case in point.

“MUFG’s strategy is to bring a regular flow of ABS by working with issuers to market paper on a regular basis,” said Binnema, who previously headed up ING’s structured solutions team in Germany.

The bank plans to grow its business in Germany, the Netherlands, Ireland, and the UK, as well as expand into Italy and Spain. The move comes after the bank told Reuters last month that it is expanding its securitisation franchise globally.

A busy primary market pipeline could provide a tailwind for MUFG’s plans. As reported, the ABS market’s summer breather was shorter than usual this year.

Issuers, wary of potential geopolitical volatility and keen to tap the market at near record tight spreads, returned to market in mid-August. Charter Court Financial Services, Volkswagen Leasing and RCI Banque were some of the first names out with deals.

While Binnema expects 2025 issuance to fall slightly short of last year’s EUR 94bn, he believes that around EUR 85bn–EUR 90bn of paper will be placed.

A scarcity of paper has been a recurring complaint from investors spoken to by Debtwire throughout the year. As reported, stockpiles of dry powder are at least partly responsible for what many investors perceive to be tight spreads.

High demand may go some way to explain heavy bids for mezzanine paper seen this year, too. NewDay’s latest credit card ABS, which priced in June, was a prime example: the coverage levels hit 7.0x for the class E notes at guidance and 5.5x at final guidance, according to Debtwire data.

“Investors increasingly make a call – ‘Do I like the deal?’ and if so, investors are fine to accept double-A, or single-A risk paper and up to sub-investment grade,” he said.

While granular deals will be the mainstay of MUFG’s growth strategy, the bank is also looking at less conventional transactions.

The second pillar of the team’s growth strategy rests on esoteric securitisations, such as data centres – a sector where MUFG is currently more active in the US.

Two European data centre transactions have been issued since last year. As reported in June, Blue Owl is mulling the use of securitisation to finance a Milan-based data centre.

While originators have the appetite to securitise esoteric assets, they often rub up against one issue: scale.

While there’s appetite to package such assets into securitisations, originators find it tricky to build portfolios large enough to be publicly syndicated.

Fibre securitisations, which would be backed by portfolios of loans to fibre companies, are another potential source of growth, though so far these have been confined to private markets.

Green securitisations are another potential avenue for MUFG to win business for its ABS syndicate.

“Last year saw a very interesting increase in green ABS supply beyond the traditional Dutch issuers, which also included two new asset classes,” said Binnema, pointing to solar loans and data centres.

After around six green deals priced last year, he is hopeful the number will grow.

Around 75% of the loans backing Toyota Financial Services’ Koromo UK 1, which priced last year, were hybrid. The issuer’s latest Italian deal was almost entirely backed by hybrid vehicle loans. “It wasn’t marketed as a green deal, but it was perceived by investors as a step up compared to pure petrol and diesel transactions,” Binnema said.

Pure EV deals, however, face hurdles. Limited historical data and uncertainty over residual values remain sticking points, alongside the challenge of building pools at sufficient scale. For now, only private EV securitisations have closed.

“EV lease receivables are typically penalised by rating agencies for lack of historical data and volatility in residual values. The paradox is that we know EVs are going to be the future,” said Binnema.

More historic data on EVs and a more buoyant secondary market for electric vehicles could help. “There is residual value risk in these contracts, and the question is, ‘What haircuts are you going to apply? How high will the haircuts be?’”