RPT-Fitch: U.S. Auto ABS Score High Marks in March

Mon Apr 29, 2013 9:08am EDT

April 29 (Reuters) - (The following statement was released by the rating agency)

As expected, U.S. auto ABS posted stellar seasonal results last month, according to Fitch Ratings.

Both losses and delinquencies declined across prime and subprime auto ABS even as used vehicle values softened and are expected to moderate further this year. Despite volatility and uncertainty, economic conditions are stable with ongoing improvement and a strong equity market. The unemployment rate dropped to a three-year low of 7.6%. This represents the lowest level since hitting a high of 10% in October 2009.

The boost in household income levels over the last few months enabled consumers to continue to pay down debt obligations, thus boosting auto ABS performance last month.

Prime 60+ day delinquencies dropped to 0.33% in March, a 20% decline month-over-month (MOM). This was the highest MOM improvement recorded in the past 12 months. Delinquencies last month were 5.7% lower compared to March 2012. Prime annualized net losses (ANL) posted a solid 18% drop MOM to 0.33% in March, from 0.40% in February. ANL were 3% below the level in March 2012. Cumulative net losses (CNL) were virtually unchanged in March versus February, at 0.30%, and were 32% stronger year-over year (YOY).

Subprime 60+ day delinquencies fell to 3.02% in March from 3.65% in the prior month, dropping 17% both on a MOM and YOY basis. Subprime ANL were 3% down in March to 5.36% from 5.53% in February. On a YOY basis, subprime ANL were still 14% higher in last month versus March 2012.

While an improving job market contributed to the downward path for losses, recoveries also are a significant factor in loss mitigation for US auto ABS. Used car values have been robust over the past two years, aiding in higher recovery levels.

Importantly, there has been some softening recently amongst used vehicles values in the latter part of 2012 and early 2013 as new car sales volume has begun to pick up.

The Manheim Used Vehicle Value Index stood at 120.4 in March, down from 122 in February and was 4.8% below March 2012.

Fitch's prime and subprime auto ABS indices is comprised of $69.6 billion of outstanding notes issued from 126 transactions. Of this amount, 71% comprise prime auto loan ABS and the remaining 29% subprime ABS.

There were no upgrades issued in March (consistent with March 2012). Fitch upgraded 13 prime outstanding notes year-to-date in 2013, versus four in 2012 through the first quarter.

Fitch's outlook for prime auto ABS asset performance is stable, while the ratings performance outlook remains positive for 2013.

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