SG and Citi pull back from structured finance

A couple of investment banks are winding back their structured finance business in Australia as their clients make plans to live without funding sourced from mortgage-backed and asset-backed securitisation this year.

A spokesperson at SG Australia confirmed yesterday that the 17 staff in its securitisation team had been told on Wednesday that the operation would cease. SG is looking to place as many people as possible in other positions.

The Sydney team was responsible for securitisation activities throughout the Asia-Pacific region.

A spokesperson for Citigroup confirmed that securitisation business would be handled by a team in Hong Kong led by Cristina Chang. A few staff would remain on the securitisation desk in Sydney.

SG was a pioneer in asset-backed and mortgage-backed financing structures in Australia from the early 1990s, and creator of some of the first structured investment vehicles, or conduits, that became a cornerstone of the market in the second half of the 1990s.

Some of its long-term customers may have to look elsewhere for help in organising funding, including the funding of the $400 million receivables pool for the David Jones store card. SG has managed this funding since the early 1990s.

The departure of Alison Gray from SG to ANZ a couple of years ago, as well as some of her team, affected SG's business. A number of SG clients switched their business to ANZ, reflecting more reasonable terms from the Australian bank.

Douglas Banks, former head of securitisation at Citi, left the bank this month.

Standard and Poor's estimated that the value of asset-backed transactions fell by 11 per cent in 2007 to $66 billion. The first half of 2007 was a rich period for structured finance including a number of jumbo deals. However, the credit crunch has since shredded volumes.

The total number of issues of residential mortgage backed, commercial mortgage backed and asset backed securities, and collateralised debt obligations fell 25 per cent from 104 to 78 last year.

Some mortgage funders have indicated plans to ignore classic securitisation structures as a funding option for the first half of the year, and some may rely on bank funding until 2009.