The latest asset-backed securities analysis from S&P Global Ratings showed weakening performances for both the U.S. prime and subprime auto loan ABS sectors in August — with net losses, recovery rates and 60-plus-day delinquencies all worsening month-over-month.

Analysts added that performance for both sectors also continued to weaken year over year, with only prime recovery rates improving from a year ago.

According to the report released on Tuesday, U.S. Auto Loan ABS Tracker: September 2016, analysts noticed losses have increased in both sectors for the past three months. The prime net loss rate in August was 0.68 percent, rising from 0.61 percent in July and 0.50 percent in August of last year. The subprime net loss rate increased to 8.35 percent in August, up from 7.53 percent in July 2016 and 6.60 percent in August of last year.

S&P Global Ratings explained the year-over-year increase of 175 basis points in subprime losses is largely due to deep subprime pools representing a greater percentage of the outstanding collateral in its index.

Despite that year-over-year downward movement, analysts pointed out that credit enhancement for 'AAA' rated classes has generally kept pace with the weakened performance.

“This collateral trend indicates weaker credit quality,” S&P Global Ratings said. “The auto industry has also become intensely competitive, which has led to price competition, loosening of credit standards and higher charge-offs.”

In more recent vintages, analysts indicated much of the increase in losses is due to a greater share of total issuance from high-loss issuers. Keeping in step with the weakened collateral performance, S&P Global Ratings noted that its loss expectations for subprime auto loan ABS have generally increased since 2011 as well.

“While our loss expectations are at historically high levels since 2011, our analysis shows that credit enhancement for classes rated 'AAA' in subprime auto loan ABS transactions has increased,” analysts said. “For these classes, we calculated the weighted average initial credit enhancement at closing and the break-even amount of credit enhancement based on transaction-appropriate assumptions for prepayment rates, loss timing, and recovery rates to support 'AAA' ratings.

“Both the initial percentage of hard credit enhancement (excluding excess spread) at closing and the weighted average break-even level increased to  higher levels for 'AAA' rated classes in transactions issued in 2015 and 2016 compared with those issued in prior periods,” analysts continued.

Turning back to the latest data, S&P Global Ratings also offered a supplement to its subprime index — creating a modified subprime index — which excludes certain high-loss deep subprime issuers.

Analysts pointed out that the modified subprime net loss rate of 6.59 percent for August was significantly lower than the overall subprime index loss rate of 8.35 percent and demonstrated less deterioration, increasing only 62 basis points year-over-year.

Returning to the overall data, the latest report noted the recovery rate for the prime sector decreased to 54.87 percent in August from 57.83 percent in July. Recoveries in the prime space improved year-over-year from 52.07 percent spotted last August.

Meanwhile in subprime, S&P Global Ratings found the recovery rate decreased to 37.34 percent in August, down from 38.86 percent in July. Subprime recoveries also decreased year-over-year from 40.63 percent seen last August.

Since May, analysts indicated recovery rates for the subprime sector have been on a downward trajectory. Referring back to their modified data set, analysts said the subprime recovery rate in August was 37.97 percent compared with 39.56 percent in July and 42.30 percent in August of last year.

Turning next to delinquencies, S&P Global Ratings determined the prime 60-plus-day rate increased to 0.50 percent in August from 0.47 percent in July and 0.41 percent in August of last year.

On the subprime side, analysts indicated the 60-plus-day delinquency rate ticked up to 4.85 percent in August 2016 from 4.74 percent in July and 4.14 percent in August of last year. They acknowledged subprime delinquencies remain below the highest level, which was recorded in August 2009 at 5.19 percent.

Touching on that modified data one more time, S&P Global Ratings calculated that the subprime 60-plus-day delinquency rate came in at 3.71 percent in August compared with 3.66 percent in July and 3.50 percent in August of last year.

“Similar to losses, the increased mix of newer, deep subprime auto loan shelves is negatively affecting delinquencies,” S&P Global Ratings credit analyst Amy Martin said.