Autos the ‘Shining Star’ of 2012 ABS Activity, Says Deutsche Bank

Asset-backed securities had a very good 2012, surging 54% year-over-year to reach $183.9 billion in issuance that includes autos, cards, and student loans, among other asset classes.

“ABS has had a great year, both in terms of volume and also in terms of new products, that have been coming to the market,” said Steven Abrahams, head of MBS and securitization research at Deutsche Bank, during its “Outlook 2013 in Securitized Products” conference call last week.

“There were four major themes that we saw: robust new issue activity, strong bid for credit products, stable credit performance and regulatory gridlock,” said Elen Callahan, a director in securitization research at the bank.  

The credit card sector showed the most improvement this year, and the student loan and equipment finance sectors demonstrated solid growth. But auto ABS accounted for the largest portion of 2012’s transactions. At $90.4 billion, auto ABS had a hearty 34% increase from last year – and its highest level of issuance since the $107 billion market peak in 2005. 

There was growth across the board in the auto subsectors of prime loans, nonprime loans, leases, and dealer floorplan ABS. Nearly half of auto ABS was comprised of prime loans, which grew 46% year over year, an improvement from 2011 when the subsector had a 3% reduction.  Subprime transactions rose to $17 billion, a 39% uptick, while dealer floorplan finished with $11.3 billion, an increase of 74%.

Though GM Financial and Santander Consumer USA accounted for most of the subprime arena, new entrants ― including America Credit Acceptance, JDByrider, Exeter Finance, and United Auto Acceptance ― made their mark in the space. 

It’s unlikely that 2012’s performance will be mirrored in 2013, but Callahan anticipates a modestly positive year in ABS. “We expect a more pristine ABS, such as triple-A, top-tier autos and cards to take their lead from the broader markets and be ranged down,” she said. “Credit performance was positive in 2012, and we expect more of the same in 2013 for cards and autos especially.”