Across a variety of loan types and characteristics, banks tap into the secondary loan sales and trading markets as buyer, seller or both for one or a combination of reasons – loan growth, managing sector or borrower exposure, geographic market expansion, exiting non-core assets, addressing legacy issues, swapping in higher yielding assets to enhance earnings, and monetizing assets to raise liquidity as examples.
While the secondary loan sale marketplace is an established market, it has experienced an uptick in volume in recent years. Annual loan trading volumes have exceeded well over $700 billion for the last twelve month period ended 03/31/19, reaching historical highs. The vast majority of these loans are performing and priced at or close to par. Since 2Q 2010, the composition of par-to-total secondary loan transactions has not dipped below 80%.
In secondary loan trading, PNC is well-positioned to assist our financial institution clients. PNC offers a variety of solutions to depository institutions looking to buy, sell, and securitize loans though principal trading activities for PNC’s balance sheet, fixed income product distribution, balance sheet advisory solutions group, and extensive relationships with over 1,200 banks, insurance companies, asset and fund managers, and other institutional investors. Among the many roles we take on as a financial services company, financial institutions can look to PNC as a trusted partner in executing secondary loan sales and/or assisting with loan purchases.
Through PNC Capital Markets, we utilize a variety of distribution channels and a network of bank and non-bank investors and buyers to connect buyers and sellers.
Loan Types Traded or Brokered by PNC Include:
- Residential including CRA lending and single family investment products – tailored pools of loans and custom CRA-eligible MBS
- C&I and SBA loans
- CRE including multifamily
- Consumer assets (student loans, credit cards, auto loans (direct & indirect), other)
Residential Whole Loan Desk
PNC’s Structured Products Group maintains a whole loan sales and trading desk that provides principal trading functions for PNC’s bank-owned residential mortgage loans and brokerage services for third party clients.
PNC is Seller of:
- New Pipeline Agency origination residential mortgages in bulk whole loan form on a servicing retained basis.
- Seasoned Performing select residential mortgage loans from PNC holdings on a servicing retained basis.
PNC is Buyer of:
- Seasoned Conforming & Jumbo loans majority performing 1st lien loans, on a servicing released basis.
- FHA EBO (early buyout) Loans
Securitization and Brokerage
PNC can securitize seasoned, performing residential portfolios with the Agencies. PNC acts primarily as an agent in the transactions, however, in some cases, can also be a principal. As broker, PNC taps its network of banks and institutional investors for loans that do not match our purchasing criteria.
CRE – Seasoned multifamily loan pools. Through the Q-Series, PNC’s SPG helps multifamily lenders to rebalance its loan portfolio by reducing its core CRE concentration through securitization.
C&I – Institutional Term Loans: PNC’s Institutional Loan Program enables our financial institutions clients to access a liquid secondary C&I syndicated loan market to execute on loan growth strategies by industry and/or geography.