Morningstar DBRS Releases August 2024 Canadian ABS and Enhanced ABS Report

DBRS Limited (Morningstar DBRS) released the enhanced version of the Monthly Canadian ABS Report (the Enhanced ABS Report) and the asset-backed securities (ABS) market data in Excel form in conjunction with the Monthly Canadian ABS Report.

The Enhanced ABS Report offers additional metrics, longer data series, definitions, and charts that provide the user with both numeric and graphic presentations to allow for a quick review of the overall performance and trends for each transaction as well as the benchmarking of transactions within an asset class.

The reports provide an overview of the Canadian term ABS market for the month ended August 31, 2024.

As of August, the total outstanding amount in the Canadian ABS market stood at $43.3 billion, down from $43.7 billion in July 2024. Regular runoff amounted to $294.6 million.

Credit cards remain the largest asset class within the ABS market, comprising 79.6% of the market, followed by auto loans and leases at 8.8% and home equity lines of credit, which comprised 4.8% of the market. The ABS market composition continues to favour consumer lending, with credit card, auto loan/lease programs, and lines of credit accounting for approximately 93.2% of the market.

Term ABS transactions have continued to perform well amid a challenging macroeconomic environment. The higher interest rates worked their way through the economy, removing excess demand, and lowering inflation. The Bank of Canada cut its benchmark interest rate three times this year, to 4.25%.

The number of quarterly filings for consumer insolvencies has returned to pre-pandemic levels and is likely to rise further as the impact of high borrowing costs and cost of living, along with a weaker labour market, continue to pressure consumers' finances. Collateral performance in Canadian structured finance transactions, has seen some slight deterioration but remains well within expectations across all asset classes. High asset resale values are likely to limit losses on defaulted secured receivables, supported by ongoing supply constraints in the housing market and the normalization of used-vehicle prices at still historically elevated levels. In general, downside risks to credit performance in securitization pools of secured and unsecured receivables will be partially mitigated by the mostly prime nature of obligors, who demonstrate a strong record of repaying their debts on a timely basis, and conservative assumptions coupled with robust levels of credit enhancement available in the transactions that can withstand a deterioration in macroeconomic activity.

The outstanding ABS Notes are well enhanced as of August 2024. Morningstar DBRS closely monitors the performance of all transactions and will continue to provide updates to the market.

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

The report is available at dbrs.morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.