DBRS Morningstar Releases November 2020 Canadian Securitization Market Overview Report

DBRS Limited (DBRS Morningstar) released the Canadian Securitization Market Overview report for the month ended November 30, 2020. The report provides an overview of the total Canadian securitization market, including term asset-backed securities (ABS), commercial mortgage-backed securities, and asset-backed commercial paper (ABCP).

The total amount outstanding in the Canadian securitization market, including private placements, was $88.4 billion as at November 30, 2020. Term ABS represented 52.0% of the total securitization market, followed by ABCP at 41.0% and private placements at 7.0%.

Credit cards continued to dominate the Canadian securitization market (excluding private placements), accounting for 31.8% of the total market. Auto-related transactions accounted for 26.0%, followed by residential mortgages at 15.9% and commercial mortgages at 5.8%.

Term ABS and transactions funded in ABCP conduits continued to perform well and were stable in November 2020. Financial assistance provided by the government and lenders to consumer and business obligors have proven effective as delinquencies and loss ratios were lower in November than at the beginning of the lockdown in March for most transactions. Although the gradual economic recovery in Q3 2020 allowed many businesses and obligors to get back on their feet, the risks to transactions in the near term are the second wave of the Coronavirus Disease (COVID-19) pandemic and the economic impact that new containment measures and provincial lockdowns may have on already-affected consumers and businesses.

Although most deferral programs that lenders offered have ended, the government’s programs (the Canada Recovery Benefit, the Canada Recovery Sickness Benefit, and the Canada Recovery Caregiving Benefit) and the temporary changes to the Employment Insurance program will continue to provide financial assistance to households directly affected by the coronavirus pandemic, which will continue to provide some level of support to credit performance in structured finance transactions. DBRS Morningstar expects delinquencies and losses to rise, but the extent of the increase will depend on the duration and type of lockdown measures, the pace of the economic recovery, and the effectiveness and extension of support from the government and lenders.

As of November 2020, payment deferrals across all asset classes had declined significantly and were near zero. DBRS Morningstar will continue to monitor the deferral rates of transactions where data is available.

The outstanding ABS and ABCP notes were well enhanced as of November 2020. DBRS Morningstar will continue to closely monitor the performance of all transactions and will provide updates to the market.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The report is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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