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FUTURE TRENDS IN ITALIAN ABS

FUTURE TRENDS IN ITALIAN ABS. Marco Grimaldi, Dresdner Kleinwort Barcelona, 11 June 2007. What’s happened to those good old BOT people?. well… they’ve become ‘impatient’…. 50. Source: Osservatorio Assofin-Crif-Prometeia. 43.4. 45. 39.6. 36.4. 40. 34.6. 32.8. 35. 30. 25. 38.1.

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FUTURE TRENDS IN ITALIAN ABS

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  1. FUTURE TRENDS IN ITALIAN ABS Marco Grimaldi, Dresdner Kleinwort Barcelona, 11 June 2007

  2. What’s happened to those good old BOT people?....

  3. well… they’ve become ‘impatient’…. 50 Source: Osservatorio Assofin-Crif-Prometeia 43.4 45 39.6 36.4 40 34.6 32.8 35 30 25 38.1 34.1 30.6 28.4 20 26.3 15 10 5 6.5 6.2 5.8 5.5 5.3 0 2001 2002 2003 2004 2005 st household debt m/l household debt

  4. … which means: the Italian Consumer market is still very attractive Fonte: Il Sole 24 Ore Fonte: Il Sole 24 Ore

  5. …but it is changing rapidly • Mortgage Loans • self-certified, low DTI, high LTVs • liquidity loans • capped/discounted/fixed rate loans • Unsecured Retail Credit • pension-secured personal loans • quasi-prime borrowers • non-prime borrowers (credit impaired) Low Risk High Risk

  6. Perspective on the Italian Sub-Prime Mortgage Market: a Reality?

  7. Perspective on the Italian Sub-Prime Mortgage Market: a Reality? • Main drivers: • Potential dimension and transparency of the sub-prime market • Lender’s risk attitude and origination channels • Legal and economic framework

  8. Datamonitor’s Sub-prime Survey

  9. Consumer Loans: The Market Total Consumer Loan Stock in € bln 100 89.9 Source: Osservatorio sul credito al dettaglio Assofin-Crif-Prometeia 90 76.5 80 70 63.3 55.0 60 48.3 € bln 50 40 30 20 10 0 2002 2003 2004 2005 2006 • Favourable interest rate environment • Adequate risk-return profiles • Diversification of the funding sources • Enhanced efficiency of the loan origination procedures • Diversification of funding channels through networks and wholesalers in partnership

  10. Consumer Loans: Typical Financing Structure of Italian Lenders Scenario 1 (small lender) Scenario 2 (medium/large lender) 1% 9% 36% 25% 30% 99% Securitisation bank loans secured loans Outright sale Outright Sale s/t facilities

  11. Consumer Loans: Typical Securitisation Structure ABS Issue Portfolio Transfer Originator SPV ex lege 130/99 Capital Markets 2 1 Collections Fixed-to-floating Swap Servicing 4 3 5 Investment Bank Originator/ Servicer Loan Portfolio Collections 4 Swap back-to-back 5 MAIN ISSUES FOR SMALLER LENDERS Originator 1 Minimum size to execute an efficient public securitisation Liquidity of the ABS issue 2 Servicing track record and availability of data for the life cycle of the product 3 Collection procedures vs. requirements of the rating agencies 4 Hedge management and accounting 5

  12. Consumer Loans: Main Hurdles and Solutions MAIN HURDLES POSSIBLE SOLUTIONS Minimum size to execute an efficient public securitisation warehouse 1 fungible issues Liquidity of the ABS issue 2 back-up servicer and credit scoring Servicing track record and availability of data for the life cycle of the product 3 Advance Facilities and Guarantees Collection procedures vs. requirements of the rating agencies 4 Balance Guaranteed Swaps, Hedge Accounting Hedge management and accounting 5

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