European ABS 2023 Credit Outlook
This commentary details our 2023 outlook for European asset-backed securitisation (ABS). We summarise our performance expectations and rating outlook for consumer loans, credit cards, revolving credit lines, and auto finance with a focus on consumers.Inflation and looming recession may lead to a moderate rise of unemployment rates which may, in turn, induce some performance deterioration. However, thanks to the sector’s relatively fast regeneration cycle, we expect lenders to act promptly to adjust their origination practices and meet their risk appetite.
Moving interest rates are not an immediate concern in a sector dominated by fixed-rate receivables, but there are differences in a sector that embraces various types of assets and interest rates may have a lagged effect on affordability. Floating benchmarks are rising faster than new origination yields and new issuances may experience a compression of excess spread with various implications.
In 2022, geopolitical instability and interest rate changes affected issuances and the year ended well below expectations. We expect some recovery in 2023 towards the sector’s historical averages.
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