Business need

A UK private bank with more than £1 billion in invested assets. The bank manages a global portfolio of alternative investments, encompassing real estate, currency and commodities

Business Objectives / Goals

  • Develop an understanding of the risks facing the Danish mortgage banks, and their sustainability in the medium term
  • Ascertain the fair value of the assets and take a decision to go long or short

Approach and Methodology

  • Studied the specific characteristics of the Danish mortgage market, including the macro-economic environment and regulatory developments
  • Analysed structural issues facing the industry and studied experts’ views on the possibility of their resolution in the medium term
  • Identified critical institutions that could come under duress due to nation-wide credit quality deterioration and maturity mismatch
  • Surveyed lenders, borrowers and industry experts to understand their perception of the situation
  • Based on the insights gathered, the team concluded that the market, regulators, borrowers and the mortgage banks were undervaluing the impending risks in the system

Business outcomes

  • The client took a top-down negative view of the economy and positioned short on most of the Danish assets
  • For a presentation at the European Covered Bond Council (ECBC), the client leveraged RocSearch’s report on the bearish view about Denmark

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