Investment bank UBS has disbanded the group that manages auto- and consumer-loan backed securitizations, according to The Wall Street Journal today.
UBS will retain its real estate ABS unit.
Auto ABS volume has been on the rise this year. So far, $56.7 billion of vehicle loans and leases have been securitized, according to JPMorgan Securities. That compares with $54 billion for all of 2010.
Here’s a look at historical auto ABS volume (data courtesy of JPMorgan Securities):
Thanks for the predictions, Hale. I’m curious to see how things shape up…
Did they try to sell it before they disbanded it?
Was the unit really worth nothing?
There is too little spread in these ABS sectors for the banks these days, which is why some banks are looking for other ways to extract value. Still, it is shocking to see UBS abandon the business.
Short run thinking again. It took time to build the business unit and that time was at a cost initially.
Now it is too much money chasing too few quality assets currently. When the economy starts to move and pent-up car demand appears,ABS (auto) will be back in vogue. I am watching car dealers reselling cars with 100,000+ miles on the car lots. Short term economics and lack of consumer confidence is stronger than “emotions” right now so used cars are the short run answer. While the engine may last longer, the A/C, fuel pumps, shocks, starter, etc cannot go much longer. Then the nickle and dime repairs start to be hundreds and thousands of dollars. Finally, a new car makes “economic” sense irrespective of consumer confidence. Then the new car sales pendulum swings the other way and ABS is needed. The same thing happened in the early 1980’s following that recession and then the Valley National Bank of Arizona created the first Auto ABS in the mid-80’s to handle the demand. I am surprised that it has taken so long to use up the existing inventory of pre-owned cars – and that is a tribute to improved car quality.
But maybe UBS needs to stop the bleeding right now because of other economic problems – perhaps too much Greek debt to write off?