US ABS Credit Trends - Moody's

US ABS Credit Trends

William Black

Head of Consumer ABS New Issue, Americas

December 2016

Contents

1. Macroeconomic Backdrop 2. US Auto ABS 3. US Credit Card ABS 4. US Equipment ABS 5. Emerging ABS Sectors

? Marketplace Lending (MPL) ? Handset Financing ? Property Assessed Clean Energy (PACE) ? Solar

US ABS Credit Trends ? December 2016 2

1

Macroeconomic Backdrop

US ABS Credit Trends ? December 2016 3

Strengthening Labor Market

Unemployment Expected to Continue at Current Levels as Consumer Sentiment Remains Stable

Unemployment rate: Total, (%, SA)

120

Baseline Scenario (November 2016)

11%

100 10%

Unemployement Rate Consumer Sentiment: Q1-66=100

9%

80

8% 60

7%

6%

40

5% 20

4%

3%

0

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16

Source: U.S. Bureau of Labor Statistics, Moody's Analytics

Source: University of Michigan

US ABS Credit Trends ? December 2016 4

Household Debt and Oil Expected to Rise

Percentage of Disposable Income

Household Debt Service Ratio, (% of Disposable Inc., SA) Baseline Forecast (November 2016)

West TX Intermediate Spot: Cushing, (FOB $ per Barrel, NSA) Baseline Scenario (November 2016)

12.0%

120

11.5%

100

Dollars per Barrel

11.0% 80

10.5% 60

10.0%

40 9.5%

9.0%

20

8.5%

0

Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Source: Federal Reserve, Moody's Analytics

Source: U.S. Energy Information Administration, Moody's Analytics

US ABS Credit Trends ? December 2016 5

January February

March April May June July

August September

October November December

Issuance Tote Board

Cumulative Issuance, 2015-2016

Transactions closed through 31 October 2016

Dollars (Billions)

2015

2016

200

180

160

140

120

100

80

60

40

20

0

Source: Moody's Investors Service

Cumulative Issuance by Asset Class, 2016

Percentage, transactions announced through 8 November 2016

As Percentage of Dollar Amount

Credit Cards 13%

Other 17%

Autos 50%

Student Loans 8%

Consumer Loans 6% Equipment 6%

Source: Moody's Investors Service US ABS Credit Trends ? December 2016 6

US ABS Credit Trends ? December 2016 7

Source: Asset Backed Alert, Deutsche Bank

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16

Spreads on 5-Year Fixed Credit Card ABS

Spreads Spike During Crisis But Remains Stable Since 2010 Between 20 and 60 Basis Points

700 600 500 400 300 200 100

0

Five Year Fixed Card Spreads (basis points)

2

US Auto ABS

US ABS Credit Trends ? December 2016 8

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