With just over three weeks left in the year, securitization industry observers expect that new origination business will end 2023 with lower supply, but that a rebound, albeit a modest one, could take place in 2024 and giving the industry a boost in business.
New securitization supply in general could reach $471.9 billion for full-year 2023 across the consumer and commercial ABS, residential mortgage-backed securities, commercial MBS and structured credit asset classes, according to Kroll Bond Rating Agency, which hosted a recent media event to share its findings. That would be a decrease of 21.2% from $598.7 billion in new business in 2022, KBRA said.
Stricter underwriting and credit tightening in 2023 accounts for some of the slowdown in business for 2023, Rahel Avigdor, a KBRA managing director said at the event.
Meanwhile the securitization market should to complete about $491.5 billion in new issuance business in 2024. The expected 2024 volume represents a 4.1% increase from estimates for 2023 business, with auto loans, student loans and credit card contracts being large components of growth in the new year, Avigdor said.
Those three components account for a large part of the general consumer ABS sector, which analysts expect to deliver a 5.6% increase over 2023 volume, according to data that the rating agency released. When broken down individually, their contributions to new supply, by percentage, are even more significant. Student loan ABS, for instance, is slated to end 2023 with $7.4 billion in issuance, and do $10.0 billion in new business in 2024, giving the sector a 36.0% increase, according to KBRA, also citing Bloomberg data.
Credit card and auto lease ABS are also expected to deliver double-digit increases in 2024, with 18.3% and 11.0% increases, respectively. By dollar amount, the credit card ABS sector is slated to issue $19.9 billion in ABS in 2023 and $23.5 billion for full-year 2024. The auto lease asset class, meanwhile, is expected to finish 2023 with $25.2 billion in business, and do $28 billion in 2024.
Auto-related sectors add a bit of depth to the outlook for next year, because aside from auto leases, non-prime auto loans and prime auto loans also contribute securitization business. Overall, the auto sectors are expected to increase moderately, driven by credit unions, which will need to diversify funding sources amid rising deposit costs, analysts said.
"In 2023 some of the growth [in auto ABS] was driven by credit unions," Avigdor said during the media presentation. "We believe that the reasons for the credit unions to enter the market are continuing to be present, and that will support growth in the next year."
Aside from the auto asset classes, KBRA examined the consumer loan and residential solar sectors and found more modest results. Consumer loan issuance is expected to end 2023 with $16.9 billion in business, and do $16.0 billion in new issuance in 2024, a 5.2% drop, according to KBRA. After completing an expected $4.8 billion in new securitization deals in 2023, the residential solar sector is expected to do $5.0 billion in 2024, giving it a 5.0% increase, according to the rating agency.
