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US prime, subprime auto loan ABS see jump in losses, says Fitch

U.S. prime and subprime auto loan asset-backed securitiesposted sizable increases in losses during August, according to Fitch Ratings'index results.

Fitch said the results reflect weaker wholesale vehiclevalues; higher losses from the 2013 to 2015 vintage pools, which havemarginally lower credit quality; and historical seasonal patterns during thefall months.

Prime 60+-day delinquencies were at 0.41% in August, 2%higher than in July, and 17% above the level recorded a year earlier.Annualized net losses jumped 25% month over month in August, hitting 0.60%, andwere 11% higher versus August 2015. Subprime delinquencies of 60+ days rose to4.86% in August, up 6% month over month and 22% year over year. Subprime annualizednet losses leapt 20% month over month to 8.89%, and were 27% higher versusAugust 2015.

The rating agency said it expects annualized losses to movehigher for the remainder of 2016, particularly subprime auto ABS losses, whichwere 27% higher in August on an annual basis, and eclipsed 8%. At its currentpace, Fitch projects subprime auto losses to pierce 10% by year-end.

Fitch further cited a drop in new vehicle sales in August, arapid increase in used supply driven by higher volumes of off-lease vehicles andtrade-ins, and rising inventory levels and incentives as negative trends thatwill pressure used values. The rating agency expects to see lower recoveries inauto ABS transactions as a result.