Delinquencies in Spanish SME ABS have reached an all time high with no sign that the trend will diminish in the near term.
The proportion of real estate borrowers in Spanish SME ABS pools heavily impact the performance of these structures, according to a Moody's Investors Report.
In June, Spanish SME securitization pools that have 50% exposure to real-estate borrowers got a delinquency rate of 6% compared to the 3% delinquency rate suffered by structures with an exposure less than 25%.
Overall performance in the sector was weaker than ever in June. The 90-360-day delinquency rate rose to 4.2% in June from 3.6% in March while it was 2.4% in June 2011. Cumulative defaults also rose to 2.00% in June from 1.49% a year ago, according to the Moody's report.
The deterioration within the sector is likely to continue as the Spanish economy further contracts by 1.5% in 2012,after having grown only 0.7% in 2011. Moody's expects that company
bankruptcies will increase losses for SME structures.
Real estate prices will also continue to fall in 2012 because the supply of property still outweighs demand. The trend will, in turn, increase losses on SME loans secured by these properties.