UBS, Merrill Are Fallen Angels In Global League Tables (Q1 2008) April 03, 2008

-- Olivia Thetgyi

Top-ranked banks such as UBS and Merrill Lynch fell dramatically or disappeared completely from the top 10 in first quarter’s global league tables provided by Dealogic for Total Securitization. As a result, banks from around the world that did not even make the cut a year ago have moved in, often with just a single massive deal.

In the latest illustration of how hard the securitization market has been slammed, the tables show virtually nonexistent volumes in the in the collateralized debt obligation and commercial mortgage-backed securities sectors. First-quarter volume was down more than 90% in the U.S. and abroad. RMBS and CMBS transactions combined totaled $29 billion globally, including $17 billion from the U.S.

In the U.S. the list of top CDO bookrunners lost four firms as the number of deals issued nosedived. In the first quarter last year, Merrill Lynch was tops in CDO underwriting with 26 deals, followed by Citi with 16 and UBS with 13. This time around, Merrill fell to sixth place with just one deal underwritten. Even the leads – JPMorgan, Citi, Morgan Stanley – only inked three, four and three deals, respectively. Merrill also dropped off the list of leading ABS underwriters from first place in 2007.

Things being as rough as they are in the market, not many people are riveted by league table ranking. “League tables won’t have much significance at this point,” said one former bank commercial real estate CDO head. “My guess is people won’t pay too much attention to this one. It’s not like people are saying ‘hey let’s go and do a CDO!’ It’s more like cleaning up what warehouses they had instead.”

Still, the tables tell a pretty grim tale. In the global picture, UBS fell completely off the top 10 in three categories. The Swiss bank disappeared from the pack from the number three spot in CDOs and the number eight seeds in asset-backed securities and commercial mortgage-backed securities. But it did lead the list of global residential mortgage-backed securities bookrunners last quarter after not even appearing on the list a year ago.

Merrill also blazed a trail on the way down. The league table stalwart vanished from the top 10 from the number one spot in ABS and the number 10 spot in CMBS. It also fell from the top CDO bookrunner in the world to the number eight position. JPMorgan took advantage of its absence to take the lead in both CDOs and ABS.

Bear Stearns, Morgan Stanley and Wachovia became no-shows in two asset classes each, although none had been in the top five in those cases. The thinning of the field was most pronounced in CMBS, where only Banc of America, Morgan Stanley and Bear Stearns clung to their spots. And in that category the first- and third-ranked banks only did one deal each.

All the disappearing acts opened the doors for newcomers to the top 10. For example, Chinese-government owned Citic moved into the top four spot in CDO rankings for a single $1.14 billion deal. Spain’s Banco Santander moved into the number four spot in global RMBS with one $3 billion transaction. And NIBC Bank, which is based in The Hague, slipped into the number nine seat in ABS with a $2.36 billion offering.

Leveraged loans continue to be the only asset-class still working in the collateralized debt obligation model, with collateralized loan obligations accounting for eight of the 10 successful U.S. CDOs in the quarter. Of the 18 CDOs totaling $3.6 billion to issue globally, 12 accounting for $4.2 billion are CLOs. Despite the beginnings of a comeback for CLOs in March, the number and size of CDOs still ended up down more than 90% from the first quarter of 2007.