European Structured Finance and Covered Bonds Outlook 2025: Will the Recovery Continue?

This commentary details our collateral performance expectations, our credit ratings outlook, and our issuance expectations for various asset classes and subsectors of European structured finance and covered bonds in 2025. The report contains dedicated sections on the main asset classes: residential mortgage-backed securities, asset-backed securities, commercial mortgage-backed securities, structured credit, nonperforming loans, and covered bonds.

Last year stood out for its high number of investor-placed issuances, not seen since the global financial crisis (GFC), which overtook retained issuance, a trend reversal from the prior two years. The year was also notable for the emergence of nontraditional asset classes like residential solar, middle-market loans and data centres, and innovative funding mechanisms.

Key highlights include:

-- For 2024, total European structured finance issuance was EUR 251 billion, out of which EUR 146 billion was investor placed (58% of total issuance).
-- For 2025, we forecast total public European securitisation to be lower than last year at EUR 210 billion, out of which distributed issuance we expect to be in line with last year of EUR 145 billion, or 65% to 70% of total expected issuance.
-- We forecast mostly stable collateral performance with only some pockets of concerns.
-- We expect a stable credit ratings outlook with a gradual upward drift as securitisation transactions deleverage.
-- In terms of Environmental, Social, and Governance (ESG), we observe a slight shift in approach with climate considerations taking the centre stage.