Moody’s Investors Service has released its second quarter data on the performance of Australian auto loan asset-backed securities (ABS), which revealed a surprise jump in loan arrears across all programs. The result was unusual because arrears rates typically remained stable or improved over the second quarter. Nevertheless, Moody’s believes loss rates will remain stable, supported by “Australia’s stable economic environment”. From the Media Release:
Moody’s Investors Service says that the performance of Australian auto loan asset-backed securities (ABS) deteriorated in the second quarter of 2015. Specifically, 30-plus day delinquencies rose to 1.47% in June from 1.24% in March and 1.10% in June 2014.
Since 2010, arrears performance in the second quarter of every year typically remained stable or improved from the first quarter, because by the second quarter, delinquent borrowers have usually caught up on their payments, following a temporary increase in arrears earlier in the year, after the holiday season.
By contrast, in this year’s second quarter, delinquencies climbed further across all auto loan ABS programs. We attribute the increase to a combination of factors, namely: (1) more loans becoming delinquent, (2) existing delinquent loans taking longer to become current, and (3) amortizing pools.
Despite the uptick in delinquencies, default and loss rates will remain steady at their current low levels…
Moody’s report notes that despite the deterioration in arrears performance, default and loss levels remain low. The most seasoned outstanding pools are from the 2011 vintage. As of the end of June, this vintage had a cumulative default rate of 2.0% and a net loss rate of 1.1%.
Such a stable performance is supported by Australia’s stable economic environment.
Might be worth watching to see if arrears rates deteriorate further next quarter.
