Wells Fargo published its preliminary forecast for new issuer consumer ABS in 2014. The banks estimates that full-year volumes will land at $160 billion, about $5 billion less than what it expects the 2013 year-end total and 7% below the actual new-issue volume of $171.3 billion in 2012.
And the bank said that this level of issuance is to be the new normal since credit card and student loan ABS are likely to be permanently lower based on regulator and accounting changes affecting cards and the elimination of the Federal Family Education Loan Program.
“In the absence of stronger economic growth and an increase in the demand for consumer credit, consumer ABS issuance in the $160 billion to $170 billion range may be the new market equilibrium in the near term,” said analysts in the report.
Consumer ABS issuance trended downward this year. Wells Fargo projected in Dec. 2012 that year-end total for 2013 would be $180 billion but the bank said that issuance is on track to reach just $165 billion.
“Issuance would need to total $47 billion for the remainder of this year to equal 2012,” said analysts in the report. “We believe it is unlikely to be achieved.”
Generally a normalization of issuance volumes is viewed as positive becasue it signals a market's maturity. In the case of consumer ABS volumes, growth has been limited because of a “weak economy, lack of credit demand and regulatory frictions,” explained bank analysts.