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China Securitization: ABS And RMBS Tracker February 2024

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China Securitization: ABS And RMBS Tracker February 2024

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.

Auto ABS

Divergence in credit performance continues
  • The weighted-average 30-plus-day delinquency ratio of auto ABS transactions that we rate increased to 0.37% for February 2024 from 0.29% during January 2024. This was mainly because deals with distinct pool attributes continued to accumulate severely delinquent loans, which usually need more time to work out.
  • The severe delinquency rate (90 plus days) rose to 0.17%, up 5bps from 0.12% for January.
  • Delinquencies continued to diverge as transactions with unique pool features accumulated arrears in our rated portfolio. For example, the range for 30-plus-day delinquencies for our rated pools widened from 0.02%-3.80% for January to 0.04%-4.47% during February.
  • When transactions with broader customer bases are excluded, the weighted-average 30-plus-day and 90-plus-day delinquency ratios have been relatively low and hover around 0.17% and 0.05%, respectively.
  • Delinquencies will likely continue to diverge in the coming months. For transactions with distinct pool attributes and rising arrear ratios, the issuers provided higher credit enhancement 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
Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 12-month moving average Average in 2023
30+ DPD (%) 0.46 0.40 0.31 0.34 0.33 0.23 0.26 0.24 0.27 0.29 0.26 0.29 0.37 0.30 0.32
90+ DPD (%) 0.26 0.26 0.18 0.20 0.20 0.11 0.12 0.12 0.13 0.14 0.12 0.12 0.17 0.15 0.17
DPD--Days past due.

Chart 1

image

Auto ABS coupon rates to trend downward following rate cuts
  • The five-year loan prime rate (LPR) remained at 3.95% since the 25 bps cut on Feb. 20, 2024, which was the largest reduction in the benchmark rate since the launch of the LPR mechanism in 2019. Also in February 2024, PBOC cut the reserve requirement ratio for financial institutions by 50bps. The level of inflation and the pace of economic growth in China will determine the future pace of interest rate changes, in our view.
  • The medium-term Shanghai interbank offered rate (SHIBOR) has continued to decline since late-December 2023. Six-month SHIBOR declined to 2.21% in mid-March 2024 from 2.6% February 2024. We expect auto-loan ABS coupon rates to follow a similar trend, albeit with time lag.
  • The three-month median of coupons on the most senior tranches remained at 2.55% for December 2023-February 2024. There was no new transaction priced in February 2024. But in the first half of March, the coupons on the senior-most tranches have declined by 10bps-30bps when compared with the most recent deals issued by the same originators and priced in the third quarter of 2023.

Chart 2

image

RMBS

Delinquency ratios remain elevated because of shrinking outstanding balance
  • The weighted-average of 30-plus-day delinquency ratios of our rated RMBS transactions edged up to 2.92% in February 2024 after fluctuating between 2.6% and 2.9% since September 2023.
  • The weighted average 90-plus-day delinquency ratio hovered between 2.3% and 2.6% over the same period.
  • Delinquency ratios generally 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.
  • We expect delinquency ratios to stay at an elevated level because of a shrunken underlying asset base after the prepayment spike in the second half of 2023 (see "China Securitization Performance Watch 4Q 2023: Slow Issuance Should Linger; Asset Performance Remains Stable," published Feb. 8, 2024, on RatingsDirect). Nonetheless, we believe that the asset performance of our rated RMBS deals is largely stable, considering that the higher delinquency rates were driven more by the paydown of underlying pools than the increase in severe delinquency, per our estimate.

Table 2

Delinquency rate composite
Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 12-month moving average Average in 2023
61-90 DPD (%) 0.05 0.06 0.06 0.06 0.06 0.06 0.08 0.11 0.14 0.13 0.10 0.11 0.10 0.09 0.08
30+ DPD (%) 1.20 1.23 1.28 1.34 1.39 1.47 1.51 2.65 2.87 2.62 2.75 2.80 2.92 2.07 1.79
90+ DPD (%) 1.03 1.07 1.12 1.17 1.21 1.28 1.34 2.34 2.49 2.32 2.45 2.54 2.60 1.83 1.57
DPD--Days past due.

Chart 3

image

Annual Review* In February 2024

Autopia China 2022-2 Retail Auto Mortgage Loan Securitization Trust 2/26/2024
*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.

Related Research

This report does not constitute a rating action.

Primary Credit Analysts:Patrick Chan, Hong Kong + 852 2533 3528;
patrick.chan@spglobal.com
Melanie Tsui, Hong Kong +852 2532 8087;
melanie.tsui@spglobal.com
Yilin Lou, Hong Kong +852 2533 3524;
yilin.lou@spglobal.com
Secondary Contacts:Jerry Fang, Hong Kong + 852 2533 3518;
jerry.fang@spglobal.com
Carol Hu, Hong Kong + 852-2912-3066;
carol.hu@spglobal.com

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