Losses in both prime and subprime auto loan securitizations rose in January, but asset performance should improve in February and March, according to Fitch Ratings.
In a report published today, the ratings agency calculates that annualized losses rose 6.8% for prime deals rose 6.8% in January on a monthly basis, while subprime losses increased by 1.3%. Fitch's prime and subprime indices total $73.4 billion in outstanding notes: 65% is backed by prime loans, and the remaining 35% by subprime loans.
Prime 60+ day delinquencies were also up at 0.38% in January, the highest level in just over a year, but were 12% lower year-over-year. Annualized net losses hit a two-year high of 0.47% in January, although the rate was well below the historical average (1.00%).
In the subprime sector, delinquencies moved up to 3.84% in January, a 12% increase over the previous months and the highest level since September 2010. Annualized net losses were stable in January at 6.43%, and were 3% below the level in January 2013.
“Performance in this sector continues to soften with losses creeping up to pre-crisis levels, but the current rate is well within historical levels,” Fitch stated in the report.
However the ratings agency expects that “seasonally strong winter months,” which is defined by consumers paying down debt levels, should boost asset performance in February and March.
Through mid-February 2014, Fitch upgraded six prime and three subprime subordinate auto loan ABS tranches. The total of nine upgrades in 2014 is up from seven issued during the same period in 2013. The outlook for the prime sector is stable for asset performance and positive for the ratings outlook, while both are stable for the subprime sector.