Net losses, recoveries, and delinquencies all weakened in the subprime ABS sector in June, according to S&P Global Ratings. Performance in the prime sector was “mixed” according to the ratings agency, however both sectors showed weaker performance on a year-over-year basis.
Subprime net losses increased to 6.12% in June, from 5.02% in May, and up 4.62% from June 2015. Prime losses were also up to 0.46% in June, an increase from 0.43% in May, and up from 0.38% in June 2015.
The increase in subprime net losses — a YoY increase of 150 basis points, or 1.5% – was “largely due” to Santander‘s Drive Auto Receivables Trust (DRIVE) transactions, according to S&P, which consists of deep subprime auto loans, representing a greater percentage of the outstanding collateral in S&P’s Auto Loan Static Index (ALSI).
By June 2016, the index included six DRIVE transactions, compared to the same time a year prior when only two ABS transactions were included in the index, with an average pool size of $1.1 billion each.
The ALSI Index extracts data from the underlying loans of securities rated by S&P’s ratings services. The index measures charge-offs, defaults, and a variety of other measures of various vintages of auto loan-backed ABS securities.
“Subprime cumulative net losses have been largely affected by the composition of the index, which is now more heavily weighted with high-loss deep subprime issuers,” S&P Global Ratings Credit Analyst Amy Martin, said in a press release.
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