Commercial Vehicle loan pools originated in recent three years show initial weak performance; performance of micro loan pools continues to remain strong
ICRA’s analysis of the pools rated by it shows that Commercial Vehicle (CV) pools originated in CY2013 and CY2014 have shown a relatively weak initial performance compared to pools originated in CY2012 and CY2011, at similar points post securitisation. Nevertheless, among the pools originated in CY2013, a gradual reduction in delinquencies has been observed around 21 months post securitisation. The median loss-cum-90+ delinquency level amongst CY2014 pools was 3.37%, 25 months post securitisation. The initial performance of CY2015 pools has also been weak, with the median loss-cum-90+ delinquency level being 1.80% at 11 months post securitisation. It has also been noticed that the collections in different quarters of CY2013, CY2014 and also CY2015 were lower than the collections during the corresponding months in CY2012 and CY2011.
Owing to the relatively weaker performance of the CY13-CY15 pools, the Credit Enhancement utilisation for these pools has been increasing in recent times. Nevertheless, the cash collateral utilisation continues to remain low as other forms of credit enhancement like subordination and Excess Interest Spread have been sufficient to meet the collection shortfall in these pools. Also, the breakeven collection efficiency for the pools is low for most transactions
“Amongst CV contracts also, new vehicles have shown a weaker performance than Used CVs. However, new CVs have shown notable recovery in Q4 FY2016. Also, performance of loans given in some states like Haryana, Jharkhand and Puducherry has been observed to be weaker”, says, Kalpesh Gada, Head- Structured Finance, ICRA.
ICRA’s analysis also reveals that seasoning[1] at the time of securitisation is seen to have a notable impact on delinquency/loss. ICRA’s analysis suggests that eventual loss among contracts seasoned for over 12 months at the time of securitisation was about 34% of the overall loss level
In the case of pools backed by Small Business Loan contracts, at a median level, the delinquencies are lower compared to those observed for CVs. Though delinquencies had increased in the previous fiscal (FY2015) some recoveries can be observed in this fiscal (FY2016).
The performance of ICRA-rated micro loan pools remains robust with very high collection efficiency levels (more than 99% on an average) leading to low delinquency levels (almost 82% transactions have nil delinquency). Owing to the strong performance of the underlying pools, the utilisation of credit enhancement in these transactions has been negligible, with no credit enhancement utilization seen in about 54% of the transactions. Cash collateral (CC) utilization has been nil in all ICRA-rated micro loan transactions. Owing to structural features a rapid CC build up is seen in transactions, with the CC covering the entire PTC outstanding in a short period of time.
Prepayment levels has been observed to be low for micro loan pools, with the average monthly prepayment rate being sub 1% barring few Originators whose pools (as their portfolio) has seen high delinquencies.