Moody’s Investors Service said it expect an increase of auto loan securitizations from regional banks like M&T Bank, Fifth Third Bank and California Republic, to increase in 2014.
M&T Bank’s priced its first prime retail auto ABS securitization, MTBAT 2013-1 in Sept. The deal totaled $1.4 billion and priced its one-year , fixed rate, A2 notes at 32 basis points over the Eurodollar synthetic forward curve.
Fifth Third Bank priced its upsized $1.25 billion auto loan securitization, FITAT 2013-1 A2, in Aug. The shorter dated, triple-A, 1.08-years notes priced at 25 basis points over the Eurodollar synthetic forward curve (EDSF).
California Republic priced its third securitization of the 2013 earlier this month. The transaction dubbed CRART 2013-3 is the regional bank’s third securitization and its first publicly offered deal. The 1.99 years, triple-A notes priced at 85 basis points over the Eurodollar synthetic forward curve.
Although these banks have historically made up a smaller share of overall auto lending volume, new regulatory capital requirements related to Basel III means that these banks are targeting auto ABS as way to “optimize their balance sheets by off-loading low-yielding, low-loss assets,” according to Moody’s.
Another source of new issuance in 2014 will originate from the re-emergence in the prime segment of captive lenders Chrysler Capital and GM Financial.
Larger banks may also add some heft to securitization volumes. Banks such as Wells Fargo, Chase and Capital One are among the leaders in the auto lending market share, yet have tended not to securitize their loans, said Moody’s.
The degree to which these large banks return to securitizing their auto lending will determine whether auto ABS issuance will keep pace with the growth in auto sales volume.
“If these large bank lenders expand their auto lending operations in 2014 without securitizing, the volume of ABS issuance will likely not keep pace with our expectations for growth in overall sales volume,” said Moody’s.