OREANDA-NEWS. Fitch Ratings says in a new report that European SME CLOs performance is largely driven by real estate assets, which represent the largest sector in the portfolio.

In Italy, the real estate sector accounts for a large 37% of SME CLO portfolios, driving the high delinquencies of securitised SME loans of approximately 4% largely. The Italian real estate sector in SME CLOs is showing arrears in excess of 5%.

In contrast the performance of post crisis Spanish securitised SME CLOs has improved. Not only has exposure to the real estate sector been reduced to 14% 3Q15 from more than 40% before the crisis, delinquencies within the sector are now in line with other industries at a low level of 0.4%.

The report presents delinquency indices for different sectors across selected countries based on loan level data sourced from the European Data Warehouse. It also compiles loan characteristics per sector. Belgian SME loans charge higher interest rate than Italian or Spanish SME loans but their performance has been better with arrears consistently below 0.5% in all sectors for the last two years. This suggests better overall underwriting standards by Belgian banks.