RPT-Fitch: February Performance Springs Into Step for U.S. Auto ABS
March 21 () - (The following statement was released by the rating agency) Asset performance came in stronger for U.S. prime auto ABS while subprime auto loans reversed a seven-month trend of rising losses, according to the latest index results from Fitch Ratings. Prime and subprime 60+ day delinquencies came in lower in February by 4.7% and 2.4% month-over-month (MOM), respectively. Prime annualized net losses (ANL) dropped 4.8% MOM while subprime ANL declined 16.5%. For both prime and subprime auto ABS performance to exceed expectations is typical for this time of year. Delinquencies and losses are likely to fall further this month as tax refunds roll in and consumers pay down debt. In the prime sector, 60+ day delinquencies fell to 0.41% in February from 0.43% in January. This represents an 11% drop year-over-year (YOY). ANL moved to 0.40% in February, from 0.42% in January. The February ANL rate was actually 5.3% higher than levels seen in February 2012, which saw extremely low ANL rates at that time declining even further in the spring months hitting a record low of 0.14% in June 2012. Prime cumulative net losses (CNL) were unchanged at 0.29% in February versus January, the fourth consecutive time the rate stayed at this level. The low loss frequency is in large part due to the stable U.S. economy. This is evidenced in stronger home values, rising equity prices, rising consumer sentiment and an expanding job market which saw slightly higher job growth in recent months. Further, healthy used vehicle values are containing loss severity resulting in elevated recovery rates on defaulted and repossessed vehicles. Subprime 60+ day delinquencies dropped to 3.65% in February (down from 3.74% in January). Subprime ANL were at 5.53%, improved from 6.62% in January, 17% lower YOY - the first YOY improvement since October last year. The Manheim Used Vehicle Value Index, which tracks used vehicle values, declined in February to 122.0 from 123.4 in January. Used vehicle values have come down off record levels seen over the past two years. Values have normalized as used vehicle volumes coming into the market have increased over the past two years. Additionally, higher incentives along with stronger new car sales are moving buyers away from used vehicles. Fitch's auto ABS indices is comprised of $67.7 billion of outstanding notes issued from 124 prime and subprime transactions. Of this amount, 73% comprise prime auto loan ABS and the remaining 27% subprime ABS. Fitch upgraded six tranches of prime auto loan ABS notes in February (consistent with 2011). Fitch expects more auto ABS upgrades throughout 2013. Fitch's outlook for prime auto ABS asset performance is stable, while the ratings performance outlook remains positive for 2013.
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