Key Takeaways
- The weighted-average 30-plus-day delinquency rate and severe delinquency rate for auto asset-backed securities (ABS) that we rate inched up to 0.26% and 0.12% respectively in August.
- The three-month median of coupons on the most senior tranches of recently closed auto ABS further fell to 2.25% following a rate cut in August.
- The weighted-average 90-plus-day delinquency ratio of residential mortgage-backed securities (RMBS) that we rate further climbed to 1.34% in August from 1.28% in July, in part because the underlying pools continued to pay down.
- The auto ABS transactions that we rate remain stable. We expect an imminent contraction in mortgage margins to reduce the credit enhancement buffer and hence rating headroom for the RMBS we rate.
China ABS And RMBS Tracker is a monthly report that tracks the performance of the China ABS and RMBS rated by S&P Global Ratings.
It is worth mentioning that in July S&P Global Ratings assigned a 'AAA (sf)' rating to the first consumer loan ABS transaction from China. We will include the performance of consumer loan ABS into this monthly series when more data becomes available.
Auto ABS
Performance remains stable while delinquency ratios start diverging again
- The weighted-average 30-plus-day delinquency ratio of auto ABS transactions that we rate increased slightly to 0.26% in August from 0.23% in July. This was mainly because deals with distinct pool attributes continued to see an accumulation of severely delinquent loans, which usually need more time to work out.
- The severe delinquency rate (90 plus days) also edged up by 1 basis point to 0.12% in August.
- Performance divergence in delinquencies gradually reemerged as transactions with unique pool features continue to accumulate arrears in our rated portfolio. For example, the 30-plus-day delinquency range of our rated pools widened slightly from 0.01%-2.27% in July to 0.02%-2.48% in August.
- When transactions with broader customer bases are excluded, the weighted-average 30-plus-day and 90-plus-day delinquency ratios remained almost flat at 0.14% and 0.04% respectively, compared with those of the previous month.
- Delinquencies may continue to diverge in the coming months. For transactions with distinct pool attributes and rising arrear ratios, a higher credit enhancement has been provided at deal close to address foreseen credit risks. We expect the overall performance of our rated transactions to remain stable.
Table 1
| 30-plus-day and 90-plus-day delinquency rate composite | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Aug-22 | Sep-22 | Oct-22 | Nov-22 | Dec-22 | Jan-23 | Feb-23 | Mar-23 | Apr-23 | May-23 | Jun-23 | Jul-23 | Aug-23 | 12-month moving average | Average in 2022 | ||||||||||||||||||
| 30+ DPD (%) | 0.29 | 0.29 | 0.33 | 0.34 | 0.39 | 0.47 | 0.46 | 0.40 | 0.31 | 0.34 | 0.33 | 0.23 | 0.26 | 0.35 | 0.27 | |||||||||||||||||
| 90+ DPD (%) | 0.16 | 0.16 | 0.18 | 0.20 | 0.23 | 0.25 | 0.26 | 0.26 | 0.18 | 0.20 | 0.20 | 0.11 | 0.12 | 0.20 | 0.14 | |||||||||||||||||
| DPD--Days past due. | ||||||||||||||||||||||||||||||||
Chart 1
Robust momentum in green auto ABS issuance continues
- After a 10-basis-point cut in the short-term loan prime rate (LPR) in August, the People's Bank of China kept the one-year LPR and five-year LPR unchanged at 3.45% and 4.20% respectively, in September.
- Following two rate cuts in June and August this year, the downward trend in benchmark lending rates continues to drive down financing costs.
- The three-month median of auto-loan ABS coupon rates further dropped to 2.25% for June-August 2023, from 2.34% for May-July, marking a declining trend for six consecutive months.
- The issuance of green auto loan ABS continues to gather pace with seven transactions accounting for 30% of the total number of China auto loan ABS transactions in 2023 as of end-August. In 2022, the share of such green deals was only 18%. Issuers' enthusiasm toward this sector is likely due to rising electric vehicle (EV) loans, which we expect to further increase in light of more EV deliveries over the next year or two.
Chart 2
RMBS
Credit enhancement buffer of RMBS that we rate declines on imminent mortgage margin contraction
- The weighted-average 30-plus-day delinquency ratio of RMBS transactions that we rate rose to 1.51% in August from 1.47% in July.
- The weighted average 90-plus-day delinquency ratio also continued rising to 1.34% from 1.28% over the same period.
- In general, the aforementioned arrear ratios tend to trend upward gradually over time if no new transaction is included. This is largely because the underlying pools continue to pay down, while severe delinquent loans take time to work out.
- The key ratios we track indicate that the asset performance of our rated RMBS deals fluctuated slightly. The weighted-average ratio of 61-90 days past due rose by 2 basis points to 0.08%, after staying at 0.06% for five consecutive months. However, the rise in the late delinquency ratio in the past two months has been driven more by the paydown of the underlying pools than the increase in severe delinquency amounts, per our analysis.
- Heeding the government's call to revive the sluggish property market and to bolster the economy, some major Chinese banks have announced plans to lower mortgage margins on existing loans. The reductions will mostly become effective in late September.
- We expect the mortgage margin contraction to reduce the credit enhancement buffer and hence the rating headroom on the RMBS we rate. Those transactions have amortized over the past few years. Available credit enhancement has been increasing in percentage terms and helps offset the adverse impact from pool yield contraction.
Table 2
| Delinquency rate composite | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Aug-22 | Sep-22 | Oct-22 | Nov-22 | Dec-22 | Jan-23 | Feb-23 | Mar-23 | Apr-23 | May-23 | Jun-23 | Jul-23 | Aug-23 | 12-month moving average | Average in 2022 | ||||||||||||||||||
| 61-90 DPD (%) | 0.05 | 0.05 | 0.05 | 0.07 | 0.06 | 0.08 | 0.05 | 0.06 | 0.06 | 0.06 | 0.06 | 0.06 | 0.08 | 0.06 | 0.05 | |||||||||||||||||
| 30+ DPD (%) | 0.90 | 0.94 | 1.01 | 1.07 | 1.13 | 1.15 | 1.20 | 1.23 | 1.28 | 1.34 | 1.39 | 1.47 | 1.51 | 1.23 | 0.85 | |||||||||||||||||
| 90+ DPD (%) | 0.77 | 0.80 | 0.85 | 0.88 | 0.95 | 0.99 | 1.03 | 1.07 | 1.12 | 1.17 | 1.21 | 1.28 | 1.34 | 1.06 | 0.71 | |||||||||||||||||
| DPD--Days past due. | ||||||||||||||||||||||||||||||||
Chart 3
Annual Review* In August 2023
| Autopia China 2022-1 Retail Auto Mortgage Loan Securitization Trust | 8/29/2023 | |||
|
*In an annual review, S&P Global Ratings reviews current credit ratings against the latest issuers/issues performance data as well as any recent market developments. Annual reviews may, depending on their outcome, result in a referral of a credit rating for a committee review, which may result in a credit rating action. The above list is not an indication of whether or not a credit rating action is likely in the near future. The key elements underlying the credit rating can be found in the issuer's latest related publication. Additionally, for each issuer/issues listed above, S&P Global Rating's regulatory disclosures (PCRs) can be accessed on the relevant page on www.spglobal.com/ratings by clicking on Regulatory Disclosures underneath the current credit ratings. |
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Related Research
- Global Auto Loan ABS: A Brief Market Update, Sept. 22, 2023
- Credit FAQ: What's Behind The First 'AAA (sf)' Rating Assigned To Chinese Consumer Finance ABS?, Aug. 24, 2023
- China Securitization Performance Watch 2Q 2023: Issuance Continues At A Slow Pace, Aug. 11, 2023
- A Primer On China's Consumer Loan ABS Market, June 9, 2023
- A Primer On China's MSE Loan ABS Market, May 10, 2023
- A Primer On Hong Kong's RMBS Market, April 13, 2023
- A Primer On China's Equipment Lease ABS Market, March 2, 2023
- China Structured Finance Outlook 2023: Issuance Likely To Slowly Stir, Jan. 12, 2023
- A Primer On Hong Kong's Consumer Finance Asset-Backed Securities Market, Sept. 22, 2022
- A Primer On China's Residential Mortgage-Backed Securities Market, May 24, 2022
- A Primer On China's Auto Loan Asset-Backed Securities Market, April 28, 2022
- China Securitization: How Strained Property Developers Might Affect Existing RMBS, Jan. 20, 2022
- Credit FAQ: What's Behind Our First Rating On Credit Card ABS In China, Nov. 30, 2021
- China RMBS Shielded From Evergrande Events, Oct. 7, 2021
This report does not constitute a rating action.
| Primary Credit Analysts: | Carol Hu, Hong Kong + 852-2912-3066; carol.hu@spglobal.com |
| Melanie Tsui, Hong Kong +852 2532 8087; melanie.tsui@spglobal.com | |
| Secondary Contacts: | Jerry Fang, Hong Kong + 852 2533 3518; jerry.fang@spglobal.com |
| Yilin Lou, Hong Kong +852 2533 3524; yilin.lou@spglobal.com |
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