Daily News: March 11, 2015

Survey: ABS Competition to Intensify in 2015

An annual Capital One Bank survey found that most (69%) asset-backed securities professionals expect increased competition in 2015, one of several industry challenges noted by attendees at ABS Vegas 2015. Capital One Bank surveyed professionals from various asset classes at the event to gauge their attitudes and opinions related to industry issues in the coming year.

Those surveyed also shared concerns over more lenient underwriting standards and shared a more pessimistic outlook on credit quality compared to 2014. More than half (51%) of respondents said they expect underwriting standards to loosen in 2015. In comparison, only 11% of those surveyed expect standards to tighten, and 38 percent say they will remain the same.

Respondents also shifted views on credit quality from those surveyed at ABS Vegas 2014. While 48% of this year’s respondents believe credit quality will remain the same in the next year, a much smaller percentage (23%) believe credit quality will improve – almost 20 percentage points lower than last year.

In line with 2014’s survey findings, nearly three-fourths of respondents (73%) expect increased regulatory requirements and associated expenses to be the most significant risk to their businesses in 2015, far exceeding concerns about a potential rise in interest rates (21%).

“Asset-backed securities professionals expect increased competition in the coming year to have an effect on underwriting standards and overall credit quality, said David Kucera, managing director, commercial and specialty finance at Capital One Bank. “In this market, companies can benefit from an experienced banking partner able to deliver customized financing solutions tailored to their industry and growth plans.

Respondents anticipate the greatest industry growth to take place in esoterics (23%), marketplace lending (19%), residential mortgage finance (16%) and commercial loans (14%). Compared to last year’s survey, more respondents predict the biggest growth will occur in auto finance (11%, up from 4%). In addition, 36% predict securitization issuance will be the fastest growing funding source for non-bank lending in 2015, followed by private equity (22%).

Industry professionals continue to view increased regulation and related costs as a significant challenge, said Michael Szwajkowski, EVP, commercial and specialty finance at Capital One Bank. “Capital One Bank is committed to helping companies navigate the opportunities and challenges across asset-backed finance in the coming year.