ABS issuance falls 5.7% in Q3 as real estate PF deals dry up

Registered asset-backed securities issuance totaled 12.5 trillion won ($9.44 billion) in the third quarter of this year, down 5.7 percent from the same period last year.

The Financial Supervisory Service said Thursday that issuance fell by about 800 billion won from a year earlier, according to its third-quarter registered ABS issuance report.

ABS are securities backed by illiquid assets such as real estate project financing loans, trade receivables and mortgage bonds.

Breaking down issuance by underlying asset, ABS backed by loan receivables totaled 7.54 trillion won, down 730.8 billion won, or 8.8 percent, from a year earlier. Real estate project financing-backed ABS issuance plunged 98.3 percent — from 1.2 trillion won in the third quarter of last year to just 20 billion won this year, a drop of 1.18 trillion won.

The FSS said the sharp decline partly reflected a base effect from last year's surge in real estate PF-backed ABS issuance that used guarantees from the Korea Housing and Urban Guarantee Corporation. Annual issuance of real estate PF-backed ABS had risen from 1.8 trillion won in 2024 to 7 trillion won last year, but through the first three quarters of this year it reached only 1.9 trillion won.

ABS backed by trade receivables, by contrast, rose 9.9 percent to 4.11 trillion won, up 370.1 billion won from a year earlier, driven largely by a surge in card receivable-backed ABS issuance from 1.26 trillion won to 3.05 trillion won. Over the same period, installment finance receivable-backed ABS fell from 1.3 trillion won to 100 billion won, while corporate trade receivable-backed ABS declined from 1.18 trillion won to 961.5 billion won.

Primary collateralized bond obligation-backed ABS issuance came to 857.4 billion won, down 394.8 billion won, or 31.5 percent, from a year earlier.

By type of asset holder, public corporations issued 5.77 trillion won in ABS, up 662.2 billion won, or 13 percent, from a year earlier, driven by increased mortgage-backed securities issuance by the Korea Housing Finance Corporation. However, the pace of MBS issuance growth slowed in the third quarter compared with the first and second quarters, reflecting a recent softening in Bogeumjari loan sales.

Financial companies issued 5.76 trillion won, down 23.4 billion won from a year earlier. Specialized credit finance companies posted issuance of 3.36 trillion won, up 652.6 billion won, or 24.1 percent, but banks and securities firms saw issuance fall by 254.5 billion won and 374.8 billion won, respectively.

General corporations issued 981.5 billion won, down 1.39 trillion won from 2.38 trillion won in the same period last year, reflecting the sharp drop in real estate PF-backed ABS issuance.

Earlier this year, registered ABS issuance in the first half totaled 26.6 trillion won, up 26.5 percent from a year earlier, boosted by expanded mortgage-backed securities issuance by the Korea Housing Finance Corporation and increased issuance of card and installment finance receivable-backed ABS. Real estate PF-backed ABS issuance, however, fell from 3.8 trillion won in the first half of last year to 1.87 trillion won in the same period this year.

Cumulative registered ABS issuance for the first three quarters of this year reached 39.09 trillion won, up 14 percent from a year earlier. The outstanding balance as of end-September stood at 246.6 trillion won, an increase of 3.1 trillion won from the same point last year.