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Global Home > ABS

China Auto ABS Data Give Early Indicator of Coronavirus Impact

A deterioration in Chinese auto-loan ABS performance has highlighted the impact of the government’s coronavirus control efforts on structured finance products, and may provide some early signals of how similar shutdowns in other markets could affect such products.

 

More on the Coronavirus

Coronavirus Risk Ranking

Coronavirus Containment Actions Pose Material Risk to Global SF

The asset performance of almost 90% of structured finance transactions globally have high or moderate vulnerability to disruptions as a result of the coronavirus and containment efforts. Our report categorizes each sector's asset performance vulnerability to the effects of a temporary coronavirus disruption scenario, including travel restrictions, business and school closures, and a moratorium on large gatherings in major metropolitan areas around the globe.

Related ReportGlobal SF Coronavirus Risk Ranking (Pockets of Asset Performance Vulnerability; Ratings Protected from Temporary Disruptions)

Aviation ABS Outlooks Revised to Negative On Coronavirus Impact

Fitch Ratings has revised its sector Asset Performance and Ratings Outlooks for aircraft and engine asset-backed securities (ABS) to 'Negative' from 'Stable-to-Negative'.

Coronavirus Payment Holidays Could Delay Subordinated SF Interest

Interest payments on structured finance (SF) subordinated notes with weak liquidity provisions may be deferred if there is a high take-up of payment holidays for an extended period due to the coronavirus outbreak, Fitch Ratings says. We expect most governments or lenders to announce some form of payment holiday or forbearance measures for consumer and SME loans.

Aircraft Lessor Sector Outlook to Negative on Coronavirus Impact

Fitch Ratings has revised its sector outlook for global aircraft lessors to negative from stable, reflecting elevated downside risks from the global spread of the coronavirus. The dramatic reduction in global travel demand is already increasing financial pressure on airlines, which Fitch expects will result in increased lease deferrals or restructurings, airline bankruptcies, and ultimately, aircraft repossessions. 

Webinar

Airline and Lessor Risk Factors Influencing Aircraft ABS in 2020

March 05, 2020 at 9:30am EST 

Please join us as our analysts discuss risks in airlines, lessors and their potential influences in the Aircraft Lessor and ABS sectors in 2020.

Hylton Heard, Senior Director, ABS team, and Johann Juan, Director, Non-Bank Financial Institutions team, will lead the discussion. 
 

Register Now

Australian Auto ABS Performance Stable, Resilient to Challenges

Both 30+ and 60+ day prime Australian auto ABS arrears improved slightly in 4Q19 from the previous quarter, down by 10bp to 1.88% and 6bp to 0.94%, respectively. Fitch Ratings says that arrears have shown an overall decline in 2019, partially supported by borrowers' increased ability to service debt following three cash-rate cuts in 2019.

European Auto ABS Index Stable as European Car Sales Grow in 2019

European ABS showed stable performance in 4Q19, with its Annualised Loss Index little changed on the quarter. Its 30+ and 60+ Delinquency Indices improved 2bp and 1bp, respectively. Performance in European auto ABS has been good and losses remain in small absolute amounts, supported by declining unemployment across the EU.


Related Webinar:
European Auto ABS - New Year – New Trends?

Pre-Crisis Structured Finance Vintages Have Higher ESG Risk

The materiality of environmental, social and governance (ESG) factors on the ratings of global structured finance transactions, reflected by ESG relevance scores (ESG.RS) of '4' or '5', is greater for older vintage structured finance credits. Pre-financial crisis vintages, originated before 2009, are most influenced by negative ESG factors.
 

Highlight Report:
Where ESG Matters for Global SF and CVB Ratings - A Case Study 

UK & Europe Credit Card Index

European Credit Card ABS Performance Remains Healthy

UK credit card ABS charge-offs and 60-180 days' delinquencies remained stable in 4Q19. For continental Europe, key performance indicators remained broadly stable despite slight increases in 60-180 days' delinquencies and charge-offs. Fitch has maintained a Stable Rating Outlook on the credit card sector.

Oil and Gas Securitizations, PDP Operating Risk Lower than U.S. Whole Business

Securitizations backed by Proved Developed Producing (PDP) securitizations have a certain degree of operating risk. However, a replacement operator can step in and provide the necessary oversight for cash flow to continue.

Coronavirus to Pressure China's Near-Term Auto-ABS Performance

The 2019 coronavirus (Covid-19) outbreak and strict restrictions implemented for containing it are likely to adversely affect employment rates and disposable incomes in the near term.

 

Related:

 

More on the Coronavirus

Webinar

U.S. Whole Business and Structured Finance Securitizations with Operating Risk: A Comparison of Current Market Transactions

Please join us as our analysts discuss the US Whole Business sector and compare it to other similar securitizations with operating risk.
 

Available On-Demand

Canadian Auto Lease ABS Webinar : BMW Canada Auto Trust (BMWCAT), Series 2020-1

Points covered during the webinar:

  • Overview of Fitch’s North American Auto Lease ABS Rating Criteria
  • Key Collateral Highlights
  • Credit Enhancement / Structure
  • BMW Canada’s Portfolio / Securitization Performance
  • Credit and Residual Analysis / Cash Flow Modeling

Listen On Demand

Airline, Lessor, ABS Credit Unaffected by 737 MAX Suspension

The Boeing Company's decision to suspend production of the 737 MAX does not yet alter the credit profiles of large North American airlines or global aircraft lessors, nor does it affect the performance of outstanding aircraft lease asset-backed securities (ABS), says Fitch Ratings.

Fitch Ratings Wins 2 Structured Finance Awards; Named Best in Financial Institutions & Public Finance

Fitch Ratings has been recognized as the best rating agency for structured finance at FinanceAsia's annual 2019 achievement awards and was also voted Australian structured finance rating agency of the year by KangaNews. FinanceAsia also named Fitch as the best credit ratings agency for financial institutions and public finance.

Korea ABS Rating Outlook Stable on Resilient Asset Performance

Fitch Ratings' Outlook on the ratings of its eight credit card and two auto-loan Korean ABS transactions is Stable, supported by resilient asset performance, benign interest rates and robust transaction structures despite the agency's expectations of slower domestic economy.

Outlook on Indian Auto Loans Stable-to-Negative Amid Economic Slowdown

Fitch Ratings revised its 2020 asset outlook on Indian auto loans to stable-to-negative, from stable in 2019, due to the country's major economic slowdown; we forecast GDP growth to decline to 4.6% in the financial year ending March 2020.

China Securitization Blockchain Use Growing, Not Yet End to End

The application of blockchain technology in securitizations in China seems to have proceeded at a faster pace than in other parts of the world, with multiple platforms developed independently.

FICO Score Variances Complicate Assessing Consumer Default Risk

Assessing downside risk of U.S. consumer credit can be more difficult if different versions of credit scores are used when lending, underwriting standards are relaxed amid a supportive economy, or when lenders are reaching for growth.

Strength of Average US Consumer Reflected in ABS Performance

Key indicators show that overall the US consumer is more resilient now than prior to the financial crisis, and these consumer conditions have supported strong loan performance in most consumer sectors, particularly for prime borrowers.

India Auto-Loan ABS Pools Continue to Outperform Originators' Mother Pools

Indian auto-loan ABS transactions will continue to outperform the portfolios of their respective originators. The transactions we rate typically have peak 90+days past due (dpd) rates that are 30% to 60% lower than the vintage pools of the originators for the different loan types. The key reason for the better performance of securitised transactions is the exclusion of a riskier portion of the originators' portfolios.

5% Market Value Decline Implies One Notch Sensitivity in UK Auto Transactions

Following the decline in UK used car values in recent months, Fitch Ratings notes that based on model-implied outcomes, an additional 5% reduction to its net base-case sale proceeds assumption would impact senior auto ABS notes' ratings by one notch. A 2% decline is unlikely to have any effect on senior notes.
 

Related Webinar: European Auto ABS - How Sensitive are UK Transactions to Used Car Price Decline?

Canadian Credit Card ABS Performance Steady in the Third Quarter

Canadian credit card ABS performance was mostly stable last quarter with all metrics consistent yoy, according to Fitch Ratings in its latest Canadian credit card ABS index. 

Fitch Ratings Launches ESG Heat Map for Structured Finance and Covered Bonds

Fitch Ratings has launched an ESG 'heat map' covering 54 different sub-sectors across 4,821 transaction and programme ratings for structured finance (SF) and covered bonds (CVB), to provide further insight into the relevance of ESG factors to credit ratings. The map is designed to help users understand how relevant individual ESG topics are to credit ratings across different sub-sectors for ABS, CMBS and RMBS transactions, and CVB programmes.

Bank of the West Exits Auto Lending; No Impact to BWSTA 2019-1 (Auto Loan ABS)

Bank of the West announced this week that they are exiting the indirect auto lending business, and will halt new, indirect retail loan originations as of Nov. 12, 2019, and service their portfolio as it pays down. The move by BOTW is not expected to affect the performance or ratings of the outstanding Bank of the West Auto Trust ABS transaction at this point.

Prime U.S. Credit Card ABS Chargeoffs Fall Below 3%; Retail Improves

Chargeoffs for prime and retail U.S. credit card ABS improved slightly last quarter following elevated levels observed in the first half of 2019, according to Fitch Ratings in its latest quarterly credit card index.

Introducing ESG Relevance Scores for Structured Finance and Covered Bonds

Fitch Ratings says social and governance risks have the most impact on its new environmental, social and governance relevance scores for structured finance and covered bonds (SF and CvB) ratings globally. Initial results show on aggregate 18% of transactions and programs across SF and CvB asset classes contain contributing ESG factors or credit rating drivers.

Credit Card ABS Performance At Stable Levels

Performance across U.S. prime and retail credit card ABS remained largely consistent as of the September 2019 distribution date, according to Fitch Rating's Prime and Retail Credit Card Indices. With the U.S. unemployment rate stable at 3.7% for the last three months, Fitch expects credit card performance to remain strong in the near term driven by strong ability of employed consumer to make credit card payments.

Fitch is the First Ratings Agency to Bring ESG Relevance Scores to Structured Finance and Covered Bonds

Our ESG Relevance Scores show the relevance and materiality of ESG to our rating decisions and are integrated into our ABS, CMBS and RMBS transaction reports and covered bonds program research to transparently and consistently display the impact of ESG elements on our credit ratings.
 

Watch the VideoIntroducing ESG Relevance Scores - Update for Structured Finance and Covered Bonds

 

Continued Slowdown in FFELP Payment Rates

FFELP student loan ABS continues to experience a slowdown in payment rates, according to a new Fitch Ratings report published today. Much of the slowdown is driven by increased utilization of income based repayment (IBR), particularly partial financial hardship (PFH) where the borrowers make payments tied to their income, which may be as low as 0$ per month. The increase in PFH and related slowdown in payment rates caused a deceleration in the decline of the weighted average loan term across the Fitch rated portfolio.

Uneven IBOR Progress Leaves Key Uncertainties for Structured Finance

Industry initiatives and adaptations in market practices continue in anticipation of the discontinuation of IBOR indices. But progress is uneven across jurisdictions and asset classes. For structured finance (SF), like other markets, key uncertainties relating to legacy contracts and transition in consumer products remain.

China Credit Card ABS Performance Worsens

Data collated by Fitch (which does not rate deals in this sector) shows aggregate performance deterioration in 27 credit card ABS transactions originated by seven banks. Some of their mother pool static performance data reported in shelf registration documents point to a similar trend.

Virtual Investor Meeting

Virtual Investor Meeting - EMEA ABS

With the most recent consumer ABS discussions focusing on autos, in this latest virtual investor meeting, Head of EMEA ABS, Markus Papenroth, discusses important trends which investors may be overlooking in the unsecured consumer space.

Webinar

European Autos: Cyclical Downturn or Structural Shift?

Fitch Ratings hosted a conversation on the Auto sector with Emmanuel Bulle, Head of EMEA Manufacturing. During this brief discussion, Emmanuel covered the following topics:

  • Cyclical weakening of sales in key markets, including China,
  • Europe and the US Managing the challenge of electrification and meeting CO2 targets
  • Navigating an uncertain political backdrop including Brexit and further trade discussions
  • Flexibility in ratings given various challenges

Listen Now

Trade War Stresses Farm Equipment Loans, ABS Ratings Stable

The ongoing trade wars have placed greater pressure on the already stressed US agricultural sector, negatively affecting equipment loan and lease asset backed securities (ABS) collateral performance. Commodity prices took a precipitous decline in 2014 and have yet to rebound, resulting in declining agricultural sales and reduced net income for US farmers. 

Chinese Auto ABS Has Similar Net Losses to Global Markets and Lower Recoveries

China's auto ABS annualised net loss (ANL) index was low over the past year, similar to the US and Australia, although Europe's was marginally better.


Related Press Release:
Chinese Auto ABS Has Similar Net Losses to Global Markets and Lower Recoveries

Australian Auto ABS Arrears Stabilise; Payment Rates Rise

Loss levels remained significantly below Fitch's expectations and we expect that ratings can withstand multiples of current loss levels, with stable macroeconomic conditions supporting borrowers' ability to service debt.

European Auto ABS Index Stable despite Steep Decline in UK Used Car Values

The UK, Germany, Spain and Italy all show a declining trend in used car prices this quarter, Fitch Ratings says in its latest index report for auto ABS in Europe. The change is particularly pronounced in the UK, where Brexit uncertainty is weighing heavily on consumer confidence. 
 

Catch up on our latest webinar:
Used Car Prices Decline – Not if Now, Why Now?

Economy, Fuel Prices Are Key for Indian Auto ABS Performance

Data released this week by the Society of Indian Automobile Manufacturers showed that total auto production fell by 10.7% yoy in April-July 2019 and passenger vehicles sales dropped by 21.6% yoy.

China Structured Finance Quarterly - 2Q19

Chinese Auto ABS, RMBS Remain Strong Amid High Household Debt

The performance of Chinese auto ABS and RMBS transactions remained strong in 2Q19, despite the country's increasing household debt, due largely to the tight underwriting standards imposed by regulators, Fitch Ratings says. We continue to maintain the stable outlook for these two sectors. 

Chinese Auto-ABS Performance Pressure Eases in 2Q19

Auto-ABS issuance reached CNY78.4 billion by end-June 2019, exceeding issuance in the first three quarters of 2018. This was partly led by the continued rise in the auto-finance penetration rate to approximately 50% by end-2018, although it remained significantly lower than that of developed markets.

Fitch Ratings: Canadian Credit Card ABS Performance Steady in 2Q

Canadian credit card ABS performance was mostly stable last quarter with all metrics consistent year over year, according to Fitch Ratings in its latest Canadian credit card ABS index. Chargeoffs on Canadian credit card ABS increased to 3.04% in second-quarter 2019 (2Q19) from 2.88% in 1Q19. However, a marginal drop in 60+ day delinquencies may indicate stable chargeoff performance in the near term.

Prime U.S. Credit Card ABS Chargeoffs Up Slightly; Retail Improves

Chargeoffs for prime U.S. credit card ABS rose slightly last quarter following a slow start to the year while retail performance rebounded notably, according to Fitch Ratings in its latest quarterly credit card index.
 

2019 Virtual Investor Meetings: U.S. ABS

Unemployment is at its lowest level in half a century and wages are still growing. John Bella discusses what this means for core assets like credit cards, prime autos and even student loans in our Virtual Investor Meeting for U.S. ABS.

Questions Increase Around Fringe Players in U.S. ABS

While U.S. core ABS performance remains strong due largely to low unemployment, many investors are zeroing in their questions on some of the sector's non-core assets, according to Fitch Ratings in its 2019 Virtual Investor Video Series for structured finance.

Structured Finance 2000-2018 Issuance Loss Estimates Down

Total losses on US and Canadian structured finance (SF) bonds are concentrated in crisis-era transactions (2005-2007 vintages) and primarily consist of losses on US RMBS, Fitch Ratings says in a new report. Losses on SF tranches issued prior to 2009 contribute 99.9% of total SF losses. Approximately 95% of pre-crisis bond issuance is resolved (repaid or loss realized) or withdrawn. 

Blockchain Offers Efficiency but Untested in Securitization

Blockchain distributed ledger technology has the potential to improve the transparency and execution time of traditional securitizations and covered bonds. However, blockchain is largely untested in securitization and covered bonds and is currently narrowly applied. While Fitch acknowledges the transactional efficiencies the technology provides, it will be a number of years before these benefits will be fully realized.

Fitch Global ABS Survey Indicates Sharply Falling Optimism on Issuance Levels

Delegates at this year's Global ABS conference in Barcelona were considerably less optimistic about publicly-placed European structured finance issuance volumes compared to last year, according to a survey conducted by Fitch Ratings. Just 36% of respondents expected 2019 issuance volumes to beat last year's EUR162.3bn, down sharply from 77% in 2018 that expected a year on year rise. 

US Auto Lease ABS Wholesale Market Outlook Neutral from Neg

Fitch Ratings expects stability in residual value (RV) realizations throughout 2019 and has revised its Wholesale Market Outlook (WMO) Haircut to neutral from negative for most auto lease asset backed securities (ABS).

Fitch Ratings: U.S. Credit Card ABS Performance Mixed Following Record-Low Unemployment

Performance of U.S. prime and retail credit card ABS continued to post mixed results, with improvements in charge-off and delinquency rates while monthly payment rates (MPR) and gross yields trended lower during the April collection period, according to Fitch Ratings. 

European Auto ABS Index Stable, but on Worsening Trend

The Fitch 30+ and 60+ Delinquency Indices remained stable in 1Q19, although the overall trend has been of gradually rising arrears since mid-2016, says in its latest index report for the sector.

 

Catch up on our latest webinar:
European Auto ABS 2Q19 Update available here On-demand

Listen Now

Webinar

EMEA Structured Finance Losses Remain Very Low

Total losses on EMEA structured finance (SF) are low and are concentrated in certain crisis-era transactions, Fitch Ratings says in a new report. More than three-quarters of all expected losses have now been realised. 


Available On-demand: Fitch Discusses EMEA Structured Finance Losses 2000-2018

Webcast

Ford Canadian Auto Loan ABS Deal: Ford Auto Securitization Trust (FAST) Series 2019-A

Available Now On-Demand

Fitch expects to rate the Ford Auto Securitization Trust (FAST) Series 2019-A prime Canadian Auto Loan ABS transaction. Please join as our analysts, Hylton Heard and Michael Buzanis discuss the deal.

 

Listen Now

Webcast

IBOR Transition Webinar

Available On-Demand

Fitch’s Chief Credit Officer, Jeremy Carter, and Group Credit Officer, Andreas Wilgen, discuss the progress which has been made to prepare financial markets for the discontinuation of IBOR indices and highlight the risks which still remain.

 

Listen Now

German Diesel ABS Risks May Be Easing, but Have Not Disappeared

Recent market and regulatory developments suggest that the immediate risks to German auto ABS transactions from declining diesel car prices have eased. This would be consistent with our decision not to adjust our asset performance assumptions so far in response to proposed driving bans and shifting consumer sentiment away from diesel, but it remains important to monitor developments and test transactions for their resulting sensitivities. 

EMEA Carmakers Catching Up with Tesla, BYD in Electric Vehicle Race

European carmakers are refocusing their strategy towards electric vehicles and catching up with specialised manufacturers. Carmakers have increased investments in plug-in-hybrids and battery electric vehicles with numerous model launches expected in the next 12 to 24 months.

Contacts

Ben McCarthy

APAC

Ben McCarthy

Analytical

+61 2 8256 0388

Markus Papenroth

EMEA

Markus Papenroth

Analytical

+44 203 530 1707

Nigel Green

EMEA

Nigel Green

Business

+44 20 3530 1507

John Bella

North America

John Bella

Analytical

+1 212 908 0243

Wendy Cohn

North America

Wendy Cohn

Business

+1 212 908 0681

Ian Rasmussen

North America

Ian Rasmussen

Analytical

+1 212 908 0232

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