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Global Credit Research - 17 Feb 2012
Toronto, February 17, 2012 -- The outlook for Canadian auto and credit card asset backed securities
(ABS) is stable given that the performance of their collateral will remain
strong, says Moody's Investors Service in its latest outlook
report. The credit quality of Canadian covered bonds will also
be stable given that the Canadian financial institutions that issue covered
bonds are strong.
In auto ABS, strong underwriting and a focus on prime quality customers
will continue to lead to strong performance, says Moody's.
"While auto originators are continuing to increase the concentration
of loans with extended terms in new transactions, borrower quality
as measured by credit scores has remained consistent between older and
more recent vintages," says Michael Buzanis, a Moody's
Vice President -- Senior Credit Officer. "A period of
economic weakness or consumer credit stress, however, would
result in higher default and loss levels on extended term loans."
Attractive alternative funding options will dampen auto ABS issuance in
2012, says Moody's, which will be similar to its 2011
level of about CAD$3 billion.
Performance of credit card ABS will remain stable as collateral continues
to be highly seasoned accounts from prime quality obligors. Moody's
does not expect the performance of Canadian credit card collateral to
improve much, however, with unemployment unlikely to decline.
Moody's expects credit card issuance in Canada to be in the CAD$7
billion range in 2012, slightly higher than the CAD$6.7
billion in issuance in 2011, as cross-border issuance remains
Accounting for 96% of ABS issuance in Canada in 2011, the
auto and card sectors will again dominate Canadian ABS in 2012,
Covered bond issuance will also remain healthy in 2012, says Moody's,
but will have a difficult time exceeding the robust issuance of 2011.
Seven major Canadian financial institutions have established programs
and will tap the market opportunistically. Issuance in 2012 will
be in the CAD$20 billion range, slightly down from 2011 levels.
The report, "Canadian ABS and Covered Bonds: 2012 Outlook,"
and all of Moody's 2012 structured finance outlooks, are available
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VP - Senior Credit Officer
Structured Finance Group
Moody's Canada Inc.
70 York Street
Toronto, ON M5J 1S9
Asst Vice President - Analyst
Structured Finance Group
Moody's: Stable outlooks for Canadian ABS and covered bonds
Moody's Canada Inc.
70 York Street
Toronto, ON M5J 1S9
No Related Data.
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