Securitization Performance Watch - S&P Global · China Securitization Performance Watch As of March...
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Securitization Performance Watch China As of March 31, 2019
Transcript of Securitization Performance Watch - S&P Global · China Securitization Performance Watch As of March...
Securitization
Performance
Watch China
As of March 31, 2019
China Securitization Performance Watch
As of March 31, 2019
1
Table of Contents
ABOUT THIS PUBLICATION ................................................................................................................... 2
STRUCTURED FINANCE RATINGS CONTACTS .................................................................................. 2
SUMMARY .................................................................................................................................................. 3
CREDIT TRENDS ........................................................................................................................................ 4
NEW ISSUANCE TRENDS ........................................................................................................................ 7
TRANSACTION PERFORMANCE UPDATE ......................................................................................... 11
RECENT COMMENTARY ARTICLES ................................................................................................... 15
China Securitization Performance Watch
As of March 31, 2019
2
ABOUT THIS PUBLICATION China Securitization Performance Watch is a quarterly review of China securitization transactions,
including those issued under the credit asset securitization (CAS) scheme managed by the China Banking
and Insurance Regulatory Commission (CBIRC) and People's Bank of China (PBOC), the securitization
scheme managed by the China Securities Regulatory Commission (CSRC), and the asset-backed notes
(ABN) scheme managed by China’s National Association of Financial Market Institutional Investors
(NAFMII).
S&P Global Ratings has compiled the information in this publication using information from public
announcements and comments from the regulators and market players, and trustee reports on the website
(http://www.chinabond.com.cn) of China Central Depository & Clearing Co. Ltd. (CCDC). S&P Global
Ratings has endeavored to provide data on a basis that is comparable between transactions. Users of the
information in this publication should, however, exercise care, because inconsistencies may exist in the
reporting format and performance definition of each of the transaction.
STRUCTURED FINANCE RATINGS CONTACTS Vera Chaplin | Melbourne | + 61 3 9631 2058 | [email protected]
Aaron Lei | Hong Kong | + 852 2533 3567 | [email protected]
Jerry Fang | Hong Kong | + 852 2533 3518 | [email protected]
Andrea Lin | Hong Kong | + 852 2532 8072 | [email protected]
Yalan Tao | Hong Kong | +852 2532 8033 | [email protected]
Iris Suen | Hong Kong | +852 2532 8092 | [email protected]
Maggie Yang | Hong Kong | +852 2533 3572 | [email protected]
Annie Wu | Hong Kong | + 852 2532 8077 | [email protected]
China Securitization Performance Watch
As of March 31, 2019
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SUMMARY New issuance in China's securitization market reached Chinese renminbi (RMB) 374.1 billion in the first
quarter (Q1) of 2019, up 69% from Q1 2018. Certain sectors, such as residential mortgage-backed
securities (RMBS) and corporate receivables securitization continued to dominate the issuance market.
Meanwhile, auto loan asset-backed securities (ABS) and lease receivables securitization also had
increased issuance in the first quarter, compared to last year. There was no major deterioration in the
performance of securitized retail receivables.
Auto Loan ABS
Auto loan ABS issuance grew rapidly in Q1 2019. The issuance amount doubled by growing 104.7%
from the same period last year, with seven transactions amounting to RMB31.2 billion issued.
Asset performance remained stable. We expect improving debt serviceability, enhanced underwriting
and risk control, and securitization’s structural protection to continue to support the robust
performance of auto loan ABS transactions in 2019.
RMBS
RMBS issuance in Q1 2019 totalled RMB67.8 billion, up 34% year over year. Five banks issued six
transactions in the first quarter. The increase in the number of banks issuing RMBS in Q1 reflected
more banks’ intention and ability to adopt frequent RMBS issuance to manage their balance sheet
amid strong mortgage demand.
The cumulative mortgage default rate in most RMBS transactions in China remained below 0.5% as of
the end of Q1 2019. We believe mortgage serviceability continues to be supported by relatively stable
employment conditions and rising household income and wealth.
China Securitization Performance Watch
As of March 31, 2019
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CREDIT TRENDS
China’s policy easing was showing results. The GDP growth in Q1 2019 stabilized at 6.4%, unchanged
from the previous quarter, meeting the government’s target for 2019. The growth rate in Q1 2019 also
met the 6.3% forecast by the International Monetary Fund. In the March data, both industrial production
and retail sales growth picked up and surprised the market on the upside. The property market also proved
resilient. In addition, the Chinese government announced a cut in the value-added tax (VAT) on March 5,
2019, which applies to the manufacturing, construction, transport, and service sectors effective April 1,
2019.
Externally, however, the unresolved trade tension between the U.S. and China will continue to pose risks
to the Chinese economy. In the week of May 6, 2019, the U.S. announced an unexpected tariff hike on
US$200 billion worth of Chinese goods to 25% from 10%, effective May 10, 2019. As the trade tension
escalates again, we expect to see continued support for the economy from the policy makers in the short
term. Meanwhile, the long-term implications on the trade tension bear watching.
Market interest rate eased moderately in Q1 2019, in response to PBOC’s policy easing. The central bank
said it intended to implement prudent monetary policy that is "neither too eased nor too tightened" in
2019. Meanwhile, it aimed to improve the structure of the country's monetary policy to give more support
to small and micro enterprises as well as private enterprises. In the first quarter of this year, the six-month
Shanghai Interbank Offered Rate moved down to 2.8% from 3.3%, and the coupons on the most senior
tranches of China auto loan ABS declined to 3.1%-4.5% in March 2019 (see chart 1).
Chart 1 Coupons On The Most Senior Tranche Of China Auto Loan ABS
Source: National Interbank Funding Center, Chinabond; compiled by S&P Global Ratings.
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
(%)
SHIBOR 6 months Coupons On The Most Senior Tranche of China Auto Loan ABS
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Auto Loan ABS
The demand for new vehicles remained weak in Q1 2019, after China registered the first decline in
passenger vehicle sales in 20 years in 2018. According to the China Association of Automobile
Manufacturers, China’s passenger vehicles sales plummeted by 13.7% in Q1 2019, compared to 2.56%
growth during the same period in 2018.
A variety of macro and industrial factors, such as reduced benefits from tax cuts, slowing economic
growth, likely cuts in the tariff on imported cars, and expected volatility in the capital markets pushed
down vehicle consumption. We currently see no clear signs that these factors will dissipate soon, and
therefore expect the auto market to stay subdued in 2019. We forecast a 3% drop at worst in Chinese
passenger vehicle sales in 2019. The Chinese government has cut VAT for the manufacturing sector to
13% from 16% from April 2019, prompting some automakers to lower prices, but we see this move as too
timid to support a strong recovery in the remainder of the year.
We believe the likely challenges facing the macro economy and the reduced car sales will not be a
significant threat to auto loan ABS transactions in China. The auto loan ABS sector has showed stable
performance for years. Improving debt serviceability, enhanced underwriting and risk control, and
securitization’s structural protection should continue to support the robust performance in auto loan ABS
transaction.
RMBS
The downward adjustment of the mortgage rate since last December continued in Q1 2019, extending the
impact to more cities in China. However, we believe strict mortgage offering policies still prevail and see
no indications of a major loosening of finance in 2019. According to PBOC, mortgage loan balance grew
by 17.6% in Q1 2019, totaling RMB26.8 trillion. The growth rate was 0.2% lower than 2018.
Asset performance in China RMBS transactions is likely to remain stable despite potential property price
volatility and regionality factors in a downturn. In our view the lower-tier cities with weaker economic
fundamentals would be much more vulnerable in a downturn and could quickly turn from growth drivers
to sector drags. Regions away from coastal clusters, and top-tier cities and their satellites towns would
also be more susceptible to negative market development. Hence, the impact of property price volatility
on RMBS transactions’ performance would vary depending on their respective geographic exposure. That
said, we believe asset performance in China RMBS transactions continues to be supported by
conservative underwriting, as shown by low loan-to-value ratios, as well as relatively stable employment
conditions and household income growth (see chart 2).
China Securitization Performance Watch
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Chart 2 Disposable Income Per Capita In Urban Areas Of China
Source: National Bureau of Statistics China; compiled by S&P Global Ratings.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
RMBDisposable Income Per Capita In Urban Areas Of China
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NEW ISSUANCE TRENDS
New issuance in China's securitization market reached RMB374.1 billion in Q1 2019, up 69% from Q1
2018 (see chart 3). The RMBS and corporate receivables securitization continued to dominate the
issuance market. In addition, auto loan ABS and lease receivables securitization issuance had also
increased in the first quarter, compared to last year. However, issuance activity in collateralized loan
obligations (CLO) and unsecured consumer credit receivables securitization declined.
Chart 3 China Securitization Issuance
*Including issuance under the CAS pilot program of the CBIRC and PBOC, the securitization program managed by
the CSRC, and the ABN scheme managed by NAFMII.
Source: Chinabond, WIND; compiled by S&P Global Ratings.
Unsecured Consumer Receivables Securitization Issuance The descending trend of the unsecured consumer receivables securitization issuance continued in Q1
2019 (see chart 4). The regulatory factors that constrained the cash loans business will continue to affect
these sectors in 2019.
0
300
600
900
1,200
1,500
1,800
2,100
2012 2013 2014 2015 2016 2017 2018 2019
(RMB billion)
Annual Issuance Q1 Issuance
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Chart 4 Selected Sector Issuance
*Excluding auto lease receivables. Source: Chinabond, Shanghai Clearing House, WIND; compiled by S&P Global Ratings.
Auto Loan ABS Issuance Auto loan ABS issuance had a strong start this year, with issuance volume increasing 105% in Q1 2019,
from the same period last year. Seven transactions amounting to RMB31.2 billion were issued in the
quarter. The significant growth is attributable to the repeated issuance from captive auto finance
companies related to various manufacturers and a low Q1 issuance base in 2018.
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Auto Loan ABS Credit Card
Receivables
Other Consumer
receivables*
RMBS CLO
(RMB million)
2015 2016 2017 2018 2019 Q1
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Chart 5 China Auto Loan ABS Transactions: Receivables Securitized
Source: Chinabond; compiled by S&P Global Ratings.
RMBS Issuance RMBS issuance amounted to RMB67.80 billion in Q1 2019, up 34% from Q1 2018. Six transactions were
issued in the first quarter. The number of banks that issued RMBS in Q1 has grown to five, from two,
reflecting more banks’ intention and ability to adopt frequent RMBS issuance to manage their balance
sheet amid strong mortgage demand. This is a result of the rapid development of the RMBS market last
year. This year, we expect to see continued issuance of RMBS from experienced bank originators. RMBS
remains an effective tool for banks to manage their balance sheet, with the double-digit growth of
mortgage loans.
0 10,000 20,000 30,000 40,000 50,000 60,000
BMW Automotive Finance (China) Co., Ltd.
China Merchants Bank
China Minsheng Banking Corp. Ltd.
Dongfeng Nissan Finance Co., Ltd.
Dongfeng Peugeot Citroen Auto Finance Co., Ltd.
Ford Automotive Finance (China) Ltd.
Fortune Auto Finance Co., Ltd.
Jincheng Bank Co., Ltd.
Mercedes-Benz Financial
Ping An Bank Co., Ltd.
Toyota Motor Finance (China) Co., Ltd.
Volkswagen Finance (China) Co., Ltd.
SAIC-GMAC Automotive Finance Co., Ltd.
SAIC Finance Co., Ltd.
GAC-SOFINCO Automobile Finance Co., Ltd.
Beijing Hyundai Auto Finance Co., Ltd.
Changshu Rural Commercial Bank
Chery Huiyin Motor Finance Service Co., Ltd.
Haima Finance Co., Ltd.
Hangzhou United Bank
Genius Auto Finance Co. Ltd.
Changan Auto Finance Co., Ltd
BYD Auto Finance Co., Ltd.
China Construction Bank
(RMB million)
2008 2012 2014 2015 2016 2017 2018 2019
China Securitization Performance Watch
As of March 31, 2019
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Account Receivables ABS Under The CSRC Securitization Scheme In Q1 2019, RMB78.9 billion worth of corporate receivables securitization were issued, up 1.3x from Q1
2018. We believe the growth was mainly due to the regulatory tightening of the corporate funding
channel in banks’ wealth management products. In 2018, the regulations for asset management reduced
corporates' use of entrusted loans and trust loans for financing. The corporates then turned to more
regulated markets, securitization included, for new funding. For instance, an increasing number of real
estate developers and associated companies have been tapping securitization issuance under the China
Securities Regulatory Commission's securitization scheme.
CLO Issuance Total CLO issuance dropped to RMB7.8 billion in Q1 2019, or 17.0% lower than Q1 last year. CLO
issuance momentum has slowed down considerably in the past few years due to limited asset yields
compared with securitization issuance costs, and reduced investor appetite amid the high number of
corporate defaults.
China Securitization Performance Watch
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TRANSACTION PERFORMANCE UPDATE
Auto Loan ABS
The asset performance of auto loan ABS in China remained stable in Q1 2019. The cumulative default
rate remained low, with most of the deals staying below 1% (see charts 6 and 7).
Chart 6 China Auto Loan ABS - Asset Cumulative Default Rate By Annual Vintage
Note: Data as of March 31, 2019. The definition of default may be different from deal to deal.
Source: Trustee reports published on Chinabond's website; compiled by S&P Global Ratings.
Chart 7 China Auto Loan ABS - Asset Cumulative Net Loss Rate By Annual Vintage
Note: Data as of March 31, 2019. The definition of net loss may be different from deal to deal.
Source: Trustee reports published on Chinabond's website; compiled by S&P Global Ratings.
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
Months after transaction close
2012 2014 2015 2016 2017 2018 2019
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
Months after transaction close
2012 2014 2015 2016 2017 2018 2019
China Securitization Performance Watch
As of March 31, 2019
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Most auto loan ABS transactions in China adopt a sequential repayment structure. The senior tranche of
issued notes typically will be fully repaid 18-20 months after deal closing (see chart 8), and the mezzanine
notes are usually paid down within two years. The short duration of the notes limits investors' exposure to
credit risks.
Chart 8 China Auto Loan ABS – Senior Notes Paydown Ratio
Note: Data as of March 31, 2019.
Source: Trustee reports published on Chinabond's website; compiled by S&P Global Ratings.
0%
10%
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90%
100%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Months after transaction close
SAIC-GMAC 2008 SAIC-GMAC 2012 SAIC 2012 SAIC-GMAC 2014-1
CMB 2014-1 CMB 2015-2 Dongfeng Nissan 2014 Toyota 2014
GAC-SOFINCO 2014 Ford 2014 Ford 2015-1 Ford 2015-2
BMW 2014 BMW 2015-1 BMW 2015-2 Volkswagen 2014
Volkswagen 2015-1 PingAn 2015-1 CMB 2015-1 SAIC-GMAC 2015-1
SAIC-GMAC 2015-2 Dongfeng Nissan 2015-1 Qi Fu 2015-5 Volkswagen 2016-1
SAIC-GMAC 2016-1 BHAF 2016-1 Mercedes-Benz 2016-1 Ford 2016-1
Jincheng 2016-1 Dongfeng Nissan 2016-1 Dongfeng Peugeot Citroen 2016-1 BMW 2016-1
SAIC-GMAC 2016-2 Volkswagen 2016-2 BHAF 2016-2 Ford 2016-2
Toyota 2016-1 Jincheng 2016-2 Dongfeng Nissan 2016-2 SAIC 2016-1
Volkswagen 2016-3 Mercedes-Benz 2016-2 BMW 2016-2 Jincheng 2017-1
Fortune 2017-1 SAIC 2017-1 SAIC-GMAC 2017-1 Mercedes-Benz 2017-1
BMW 2017-1 Ford 2017-1 BHAF 2017-1 Toyota 2017-1
Dongfeng Nissan 2017-1 Volkswagen 2017-1 SAIC-GMAC 2017-2 Jincheng 2017-2
Dongfeng Nissan 2017-2 BMW 2017-2 Ford 2017-2 Dongfeng Peugeot Citroen 2017-2
Fortune 2017-2 Changshu 2017-1 Volkswagen 2017-2 BHAF 2017-2
Mercedes-Benz 2017-2 Dongfeng Nissan 2017-3 CMB 2017-1 Chery Huiyin 2017-1
Toyota 2017-2 GAC-SOFINCO 2017-1 Haima 2017-1 Volkswagen 2017-3
BMW 2017-3 Chery Huiyin 2017-2 Hangzhou 2017-1 Ford 2018-1
SAIC-GMAC 2018-1 Dongfeng Nissan 2018-1 GAC-SOFINCO 2018-1 PingAn 2018-1
Fortune 2018-1 Chery Huiyin 2018-1 SAIC 2018-1 SAIC-GMAC 2018-2
Dongfeng Nissan 2018-2 Genius 2018-1 Chery Huiyin 2018-2 Ford 2018-2
Mercedes-Benz 2018-1 Dongfeng Nissan 2018-3 BMW 2018-1 GAC-SOFINCO 2018-2
Fortune 2018-2 CMB 2018-1 Dongfeng Nissan 2018-4 Chery Huiyin 2018-3
Mercedes-Benz 2018-2 Changan 2018-1 BMW 2018-2 GAC-SOFINCO 2018-3
Genius 2018-2 CCB 2018-1 BYD 2018-1 SAIC 2019-1
CMB 2019-1 BMW 2019-1 SAIC-GMAC 2019-1
China Securitization Performance Watch
As of March 31, 2019
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RMBS
The cumulative mortgage default rate of RMBS transactions in China by annual vintage remained mostly
below 0.5% as of March 31, 2019 (see chart 9).
Chart 9 Chinese Bank-Sponsored RMBS - Asset Cumulative Default Rate By Annual Vintage
Note: Data as of March 31, 2019. The definition of default may be different from deal to deal.
Source: Trustee reports published on Chinabond's website; compiled by S&P Global Ratings.
0.00
0.20
0.40
0.60
0.80
1.00
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57
(%)
Months after transaction close
2014 2015 2016 2017 2018
China Securitization Performance Watch
As of March 31, 2019
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Borrowers' prepayment behavior has exhibited certain differentiation among transactions. The mortgage
prepayment rate overall remains stable (see chart 10).
Chart 10 China's Bank-Sponsored RMBS - Asset Prepayment Rate (CPR)
Note: Data as of March 31, 2019. The definition of prepayment may be different from deal to deal.
Source: Trustee reports published on Chinabond's website; compiled by S&P Global Ratings.
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57
(%)
You Yuan 2014-1 Zhao Yuan 2015-1 Qi Fu 2015-1He Jia 2015-1 Ju Rong 2015-1 Jian Yuan 2015-1Jing Cheng 2015-2 Zhong Ying 2015-2 Jian Yuan 2015-2Xin Rong 2016-1 Jian Yuan 2016-1 Jia Mei 2016-1Chuang Ying 2016-1 He Jia 2016-1 Ju Rong 2016-1Zhong Ying 2016-1 Su Fu 2016-1 Zhong ying 2016-2Zhong Ying 2016-3 Qi Fu 2016-1 Jian Yuan 2016-2Jian Yuan 2016-3 Jian Yuan 2016-4 Gong Yuan 2016-4Zhong Ying 2017-1 Zhong Ying 2017-2 Hang Ying 2017-1Jian Yuan 2017-1 Jian Yuan 2017-2 Jian Yuan 2017-3Jian Yuan 2017-4 Xing Yuan 2017-1 Ju Rong 2017-1Jian Yuan 2017-5 Jian Yuan 2017-6 Long Ju 2017-1Jian Yuan 2017-8 Jian Yuan 2017-9 Gong Yuan 2017-3Gong Yuan 2017-4 Gong Yuan 2017-5 Zhong Ying 2017-3Jian Yuan 2017-7 Jian Yuan 2018-1 Jian Yuan 2018-2Jian Yuan 2018-3 Zhong Ying 2018-1 Jian Yuan 2018-4Jian Yuan 2018-5 Jian Yuan 2018-6 Jian Yuan 2018-7Jian Yuan 2018-8 Jian Yuan 2018-9 Jian Yuan 2018-10Jian Yuan 2018-11 Gong Yuan 2018-1 Gong Yuan 2018-2Gong Yuan 2018-3 Xing Yuan 2018-1 Xing Yuan 2018-2Jia Mei 2018-1 Jian Yuan 2018-12 Jian Yuan 2018-13Jian Yuan 2018-14 Jian Yuan 2018-15 Gong Yuan 2018-4Gong Yuan 2018-5 Gong Yuan 2018-6 Gong Yuan 2018-7Gong Yuan 2018-8 Gong Yuan 2018-9 Gong Yuan 2018-10Zhong Ying 2018-2 Xing Yuan 2018-3 Nong Ying 2018-5Jiao Ying 2018-1 Gong Yuan 2018-11 Hui Yi 2018-1Jian Yuan 2018-16 Jian Yuan 2018-17 Jian Yuan 2018-18He Jia 2018-1 Jiao Ying 2018-2 Gong Yuan An Ju 2018-1Gong Yuan An Ju 2018-2 Jian Yuan 2018-19 Jian Yuan 2018-20Guang Yuan 2018-1 Jiao Ying 2018-3 Gong Yuan An Ju 2018-3Gong Yuan An Ju 2018-4 Gong Yuan An Ju 2018-5 Zhong Ying Wan Jia 2018-1Zhong Ying Wan Jia 2018-2 Xing Yuan 2018-4 Jian Yuan 2018-21Jian Yuan 2018-22 Zhong Ying Wan Jia 2019-1 Zhu Yuan 2019-1Nong Ying 2019-1 Gong Yuan An Ju 2019-1 Jian Yuan 2019-1
Months after transaction close
China Securitization Performance Watch
As of March 31, 2019
15
RECENT COMMENTARY ARTICLES
Worldwide Auto Sales Will Slump More Than Expected In 2019, May 6, 2019
Expected In 2019APAC Economic Snapshots: China’s Easing Gains Traction, March 22, 2019
An Overview of China’s Auto Finance Market And Auto Loan Securitization, March 12, 2019
Economic Research: China Slowdown—This Time Is Different, Jan. 31, 2019
China Property: Regionality Factors Could Surface In A Downturn, Jan.29, 2019
Macro And Industry Pressure Won’t Be A Significant Threat To China Securitization In 2019, Jan.
23, 2019
China Securitization Performance Watch
As of March 31, 2019
16
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