A growing number of ABS professionals expect credit quality to decline and underwriting standards to tighten this year, according to a survey released Tuesday by Capital One Bank.

But despite those predictions and overall economic uncertainty, the survey found that 80% expect buy-side interest to increase or remain the same this year.

The results of the 133-person questionnaire show that 54% of ABS professionals expect decreased asset quality in 2016, compared with only 29% in 2015. The number projecting stricter credit standards in place for 2016 jumped to 50%, a year after only 11% expected that trend to develop in 2015.

 “We are seeing cautious optimism in the marketplace; expectations of growth are balanced with understandable concern about asset quality and a potential tightening of credit standards," said David Kucera, managing director of the financial institutions group at Chevy Chase, Md.-based Capital One, in a press release.

The survey was conducted among professionals from various asset classes who attended the ABS Vegas 2016 industry conference in February, co-hosted by the Information Management Network (IMN) and the Structured Finance Industry Group.

With heightened underwriting concerns as well as increased buy-side interest, 51% of the respondents at the event predicted growing competition for ABS assets from other investors. The largest percentage growth for competitiveness among the asset classes is projected for marketplace online lending securitization, with 41% seeing greater interest in that fast-growing, but still diminutive, marketplace.

Those surveyed also expected more bidders for auto finance ABS (12%) and credit card debt (11%). Those levels closely matched growing competition levels for esoteric ABS assets (11%) and residential mortgages (10%), but Capital One noted that the expectations for more investor involvement in those areas have dropped by about half from last year’s survey.  

Increased regulatory requirements and expenses represent the professionals’ chief risk concerns for 2016 (68%). 



Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.