An annual Capital One survey found that despite overall economic uncertainty, more than three-quarters of asset-backed securities (ABS) professionals (81 percent) expect buy-side interest to increase in the coming year—a nearly 50 percent increase from 2016, when only 42 percent expected an increase for the year ahead. Capital One surveyed professionals at SFIG Vegas 2017 for their views on the ABS market in the next 12 months.
“We are seeing increased optimism and greater expectations for growth in the marketplace compared to 2016,” said David Kucera, Senior Managing Director, Financial Institutions Group at Capital One. “It is clear from our survey results that ABS professionals have a positive outlook towards credit, underwriting and competition in 2017, and they continue to see opportunities in this space.”
When asked to name the sector in which they foresee the greatest amount of growth in 2017, 27 percent of industry professionals stated residential mortgage finance, followed by asset-based loans/factoring (25 percent) and leveraged loans (18 percent).
Nearly two-thirds of respondents (65 percent) believe that credit quality will improve or remain the same in 2017, compared to just 46 percent in 2016. Additionally, a significant number of respondents anticipate that issuers will loosen underwriting standards in the coming year. Nearly half of respondents (47 percent) said they expect more relaxed standards, compared to only 25 percent of those surveyed in 2016.
In line with 2016, the vast majority of respondents believe that competition in their asset class will increase or remain the same in the coming year (94 percent), with only 6 percent expecting a decrease in competition. In addition, more than half of survey participants (58 percent) cited regulatory uncertainty as the biggest risk to their business followed by potential increases in interest rates (17 percent) and limited access to credit (11 percent).
“As the industry continues to see some uncertainty around the outlook for interest rates and regulation, institutions and investors can benefit from working with a trusted financial partner that has experience navigating a variety of market cycles,” Kucera said.
Capital One’s Financial Institutions team is dedicated to the lender finance market, and works with a wide variety of non-bank financial institutions and asset managers. The team is focused on providing customized lending, advisory and financing products and solutions—including asset securitization, recourse financing and interest rate hedging.
Capital One conducted a proprietary survey of conference attendees at SFIG 2017 in Las Vegas, Nevada. Survey participants included professionals from various asset classes within the asset-backed securities industry, including auto finance, commercial loans, credit card debt, equipment finance, esoteric/off-the-run, residential mortgage finance and other consumer debt. Percentages are based on 148 responses.