NEW YORK CITY-CMBS suffered another blow to the head after Credit Suisse announced the shutdown of its commercial mortgage-backed securities origination division during its quarterly earnings call on Tuesday, a sign the investment bank is significantly downscaling its offerings of securitized products. A spokesman for Credit Suisse tells GlobeSt.com that while the firm will eliminate its CMBS origination business, the company will continue to operate its secondary market-trading branch.

The decision was coupled with the elimination of 1,500 positions companywide, 50 of which that were part of the CMBS origination group, the Wall Street Journal reported. The reductions are expected to save around $2 billion, according to company earnings.

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Manus Clancy, senior managing director at Trepp LLC, tells GlobeSt.com that Credit Suisse’s actions are a result of the volatile CMBS market rather than a leading indicator. “We started seeing spreads start creeping up in June, going significantly wider in July and they got absolutely crushed in August,” Clancy says. “Things have danced around considerably to the point where a lot of dealers felt that it was hard to assure themselves that they would see a profitable CMBS deal in the current market. With spreads bouncing around as much as they were, it was hard for dealers to lock-in loans and predict profitable deals in the current environment.”

Several banks, Clancy says, are continuing to pull back. Earlier in the summer, Goldman Sachs & Co. and Citigroup Inc. yanked $1.5 billion of CMBS off-the-market after Standard & Poor’s altered its ratings criteria. In other cases, he says some banks have pulled back in a quieter fashion. "They were quoting loans, but quoting them at spreads that were so high that they were destined to lose,” Clancy says. “Insurance companies and other types of lending institutions pulled back even harder, and then there’s the third option which was Credit Suisse, which just got out of the business entirely.”

Others are considering to consolidate. In a separate deal, Citigroup, Deutsche Bank AG, Guggenheim Securities LLC and UBS AG are in talks to bundle $1.5 billion worth of commercial mortgages and sell them as bonds. And with several banks testing the waters once again, Clancy says CMBS had “a nice rally” at the end of October that resulted from the European bailout deal, despite a three-month losing streak. “In that regard, things did seem to get a little bit better,” he says. “Until we get more clarity in terms of the US economy and in terms of whether Europeans have figured out the problems with the banks and the sovereign debt, the CMBS market will continue to bounce around in the face of these other, larger issues.”

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