NEW YORK -

Reversing an improvement that spanned four consecutive months, S&P Global Ratings determined collateral performance for subprime auto loan asset-backed securities (ABS) deteriorated month-over-month in June with net losses, recoveries and delinquencies all weakening.

On a year-over-year basis, analysts found that overall performance weakened for both subprime and prime ABS, according to S&P Global Ratings' report U.S. Auto Loan ABS Tracker: July 2016.

S&P Global Ratings calculated subprime net losses amounted to a year-over-year increase of 150 basis points. Analysts insisted this jump is largely due to Santander’s Drive Auto Receivables Trust (DRIVE) transactions, which consist of deep subprime auto loans, representing a greater percentage of the outstanding collateral in S&P's Auto Loan Static Index (ALSI).

As of June 2015, S&P Global Ratings noted only two DRIVE transactions were included, and they had aged only a few months at that time. As of June of this year, analysts mentioned the index includes six DRIVE transactions with an average pool size of $1.1 billion each.

S&P Global Ratings went on to point out several DRIVE transactions are in their peak loss periods, incurring annualized losses of between 8.2 percent and 13.5 percent.

The performance of Santander Consumer USA’s paper is being dissected as the finance company has yet to report its second-quarter financial statement. On July 25, SCUSA announced that it was delaying the release of its Q2 2016 financial results that were previously scheduled for two days later. The company said the decision was because its financial statements for the quarter “have not yet been completed.”

SCUSA went on to say, “The company is in discussions with its current and previous independent accountants regarding certain accounting matters, primarily related to the company’s discount accretion and credit loss allowance methodologies. The resolution of these matters may impact prior period financial statements and the timing of the filing of the company's quarterly report on Form 10-Q for the quarter ended June 30.

“The company is working diligently to file the Form 10-Q and schedule its earnings call as soon as practicable,” added SCUSA, which still hasn’t rescheduled its Q2 release.

No matter what’s happening at Santander, S&P Global Ratings maintained the performance of the vintages analysts track in their ALSI demonstrates the effect of the composition.

S&P Global Ratings indicated cumulative net losses for the prime 2015 vintage through month eight are at 0.21 percent, which is the highest cumulative net loss analysts have seen for month eight in prime vintages since 2009.

“We believe the early weakness is because some issuers have securitized a slightly weaker mix of collateral than in prior years,” S&P Global Ratings analysts said. “To reflect this change, as well as weakness in recent securitization vintages, we've increased our expected cumulative net loss levels on certain transactions.”

Finishing a discussion about the prime space, S&P Global Ratings reported net losses in the prime sector in June came in at 0.46 percent, an increase from 0.43 percent in May and 0.38 percent in June of last year.

At the same time, analysts pointed out the subprime net loss rate increased to 6.12 percent from 5.02 percent in May and 4.62 percent spotted last June. Analysts also referenced that net losses had been declining since February through May.

Furthermore, S&P Global Ratings highlighted the 2015 subprime vintage is experiencing the highest cumulative net losses since 2008.

Through month eight, cumulative net losses for the 2015 subprime vintage are 2.52 percent compared with 2.13 percent for 2014 and 2.54 percent for 2008 through the same month.

While losses have trended upward for the 2013, 2014 and 2015 vintages, S&P Global Ratings credit analyst Amy Martin mentioned those for 2013 and 2014 remain below 2007 and 2008 levels, whereas losses for the 2015 vintage are higher than 2007 but lower than 2008.

“Subprime cumulative net losses have been largely affected by the composition of the index, which is now more heavily weighted with high-loss deep subprime issuers,” Martin said.

To reflect this situation, S&P Global Ratings created a modified index that excludes three high-loss subprime issuers that have accounted for a larger proportion of the overall index's increase in cumulative net losses.