Fifth Third Returns to Securitization Market With $1.3B Transaction

Fifth Third Bank’s latest $1.37 billion offering marks the bank’s return to the auto ABS market after a two-year hiatus.

The 2019-1 transaction will be Fifth Third’s first auto securitization since the prime lender issued a $1 billion offering in September 2017.

While the two transactions share similarities, there are distinctions to be made in the pools’ characteristics, which prompted one rating agency to increase loss expectations. Moody’s Investors Service bumped up its cumulative net loss expectation 35 basis points to 1%. The raise, the presale report noted, was due to previous transactions’ worsening performance and deterioration in managed portfolio performance.

“[Fifth Third’s] managed portfolio performance is trending worse,” the Moody’s presale report said, adding that “annualized net loss at the end of 2018 was 0.41%, compared to 0.35% for the prior year and 0.21% for 2015.”

Meanwhile, S&P Global Ratings held steady on loss expectations in the 0.65% to 0.75% range. According to S&P, the bank was servicing $8.4 billion of loans at yearend 2018, down 0.28% year over year.

S&P noted a dropoff in longer term loans in the 2019 securitization pool. Loans with terms from 73-to-75 months fell to 1.4% of the pool balance, compared with 35.9% in the 2017 transaction. The percentage of 76-to-84 month loans fell 50 basis points to 4.6%. Both securitizations had a weighted average Fico of 755.

The securitization is slated to close May 8.

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