Moody's Sees European ABD, RMBS Transactions Stable in FY14 (FXE) (UUP)
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The credit quality of European ABS and RMBS transactions will remain stable overall in 2014, says Moody's Investors Service in its Outlook report for the sector published today. Against the backdrop of stabilising macroeconomic drivers for most countries, affordability across Europe will be sustained by the low interest rate environment, prudent underwriting criteria and regulatory initiatives to boost credit supply. Moreover, the rating agency expects European ABS and RMBS issuance to remain low in 2014.
After a sustained period of turbulence in economic and financial markets, the European economy has emerged from recession and looks set for a period of greater stability over the coming 24 months.
For some countries, however, the effect of unemployment stabilising at high levels and growth rates at low levels, combined with the persistent effects of tightened credit supply, will continue to negatively affect the credit quality of the collateral backing ABS and RMBS securitisations.
While considerable risks remain, Moody's collateral performance outlook for European ABS and RMBS now seems less uncertain than it has been for some time, although performance dynamics will vary from country to country. The rating agency has updated to positive its collateral performance outlook for the UK for credit card ABS, prime RMBS and buy-to-let RMBS, as Moody's believes that UK transactions will continue to improve, aided by robust domestic recovery and low interest rates. The performance of German ABS and RMBS transactions, as well as RMBS deals in the Netherlands, remain stable at their current robust levels.
Although macroeconomic challenges remain for consumers, the Italian RMBS and consumer and auto ABS sectors have returned to stable outlooks aided by relatively sound economic indicators, proven resiliency and continued low household indebtedness compared to most European peers. Albeit for different reasons, Spanish ABS and RMBS and Irish RMBS are still under stress and will retain negative collateral outlooks for the next 12 to 18 months.
In Ireland, the economic situation is improving, but concerns around the implementation of debt forgiveness schemes and questions around how losses will ultimately be realised lead the rating agency to maintain its negative outlook.
Moody's expects that European ABS and RMBS issuance will remain low in 2014, similar to 2013, and will recover thereafter. Bank balance sheet deleveraging supported by greater banking sector liquidity and regulatory initiatives that provide cheaper alternatives to securitisation are weighing on volumes. Reducing spreads across Europe will lead to greater issuance from markets such as Italy, UK non-conforming RMBS or new markets, such as Russian RMBS.
After a sustained period of turbulence in economic and financial markets, the European economy has emerged from recession and looks set for a period of greater stability over the coming 24 months.
For some countries, however, the effect of unemployment stabilising at high levels and growth rates at low levels, combined with the persistent effects of tightened credit supply, will continue to negatively affect the credit quality of the collateral backing ABS and RMBS securitisations.
While considerable risks remain, Moody's collateral performance outlook for European ABS and RMBS now seems less uncertain than it has been for some time, although performance dynamics will vary from country to country. The rating agency has updated to positive its collateral performance outlook for the UK for credit card ABS, prime RMBS and buy-to-let RMBS, as Moody's believes that UK transactions will continue to improve, aided by robust domestic recovery and low interest rates. The performance of German ABS and RMBS transactions, as well as RMBS deals in the Netherlands, remain stable at their current robust levels.
Although macroeconomic challenges remain for consumers, the Italian RMBS and consumer and auto ABS sectors have returned to stable outlooks aided by relatively sound economic indicators, proven resiliency and continued low household indebtedness compared to most European peers. Albeit for different reasons, Spanish ABS and RMBS and Irish RMBS are still under stress and will retain negative collateral outlooks for the next 12 to 18 months.
In Ireland, the economic situation is improving, but concerns around the implementation of debt forgiveness schemes and questions around how losses will ultimately be realised lead the rating agency to maintain its negative outlook.
Moody's expects that European ABS and RMBS issuance will remain low in 2014, similar to 2013, and will recover thereafter. Bank balance sheet deleveraging supported by greater banking sector liquidity and regulatory initiatives that provide cheaper alternatives to securitisation are weighing on volumes. Reducing spreads across Europe will lead to greater issuance from markets such as Italy, UK non-conforming RMBS or new markets, such as Russian RMBS.
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