Fifth Third’s $1B Auto Securitization Boosts Prime Pipeline

  • William Hoffman
  • September 8, 2017

Fifth Third Bancorp is prepping its first securitization since 2015, which puts 2017 prime issuances on pace to match the previous year’s rate, according to Thursday’s presale reports.

Ford Motor Credit Co., General Motors Financial, and Fifth Third Bank combined to add $3.4 billion in prime auto loan and lease asset-backed securities, bringing total prime issuances to $41.3 billion for the year to date. In 2016, full-year prime issuances totaled $53.2 billion loan and lease issuances.

Fifth Third Bank plans to issue $1 billion on the market backed by prime new and used auto loans with an average Fico score of 754 and a minimum of 650. Delinquencies made up 0.32% of the regional bank’s $8.6 billion auto portfolio according to the report.

Yet, there is more risk in this issuance compared to the bank’s previous notes because of the longer loan terms. More than 40% of the pool includes loans with terms between 73 and 84 months.

GM Financial’s $1 billion lease-backed securitization similarly features the highest weighted average Fico — 760 — the lender has ever issued. However, the pool has increased risk from a high concentration of leases that will come back on the market in 2019 — a period analysts anticipate is particularly vulnerable to depreciating used-vehicle sales.

The pools’ residual value composition — the estimated ratio of the future residual value to the current pooled asset value — is the highest it has ever been for a GM lease securitization at 73.1%. Residual value losses are expected to account for 11.85% of the pool, according to Fitch Ratings, who noted that the captive’s history remains limited.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.

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