Along with offering a glimpse into some overall quarterly metrics, S&P Global Ratings reported that collateral performance in the U.S. prime and subprime auto loan asset-backed securities (ABS) sectors improved in February, relative to January.
Analysts determined that losses, delinquencies and recoveries performed better month-over-month due to year-end seasonality coming to an end and consumers using tax refunds to catch up on their payment obligations.
“Tax refunds also created demand for used vehicles, thereby bolstering recovery rates on a month-over-month basis. On a year-over-year basis, both sectors continued to weaken, with delinquencies and losses increasing and recoveries declining,” the firm said, according to a report published last week.
S&P Global Ratings noticed prime net losses decreased month-over-month to 0.73 percent in February from 0.88 percent in January and increased year-over-year from 0.57 percent.
“We attribute much of 28 year-over-year uptick in losses to a couple of regional banks whose auto loan ABS transactions are becoming a slightly larger share of the prime index and their 2015, as well as 2016, securitizations experiencing weaker performance than their 2014 deals,” analysts said.
“We’re also seeing higher losses for some captive finance entities on their 2016 transactions and lower recovery rates,” they added.
Meanwhile, S&P Global Ratings noted the subprime net loss rate decreased to 7.51 percent in February from 9.12 percent in January but increased from 7.00 percent registered in February of last year.
“This 7.3 percent year-over-year increase in losses is due to lower recoveries and deep subprime lenders representing a greater share of the subprime index,” analysts said.
In a separate report, S&P Global Ratings found that total U.S. ABS issuance — including the credit card and mortgage spaces — reached $59 billion in the first quarter, up sharply from $44 billion in Q1 2016. The report attributed the gain to “healthy employment and consumer credit.”
Analysts said auto-related issuance “may continue to surprise” as the segment “continued to dominate other sectors,” totaling $26 billion in Q1. The figure marked a rise of $2 billion year-over-year.
S&P Global Ratings indicated auto loan issuance reached $20 billion, including $13 billion in prime transactions and $7 billion in subprime transactions. Auto lease issuance was roughly in line with last year’s total, at $5 billion, and rental car deals added another $1 billion.