Wall Street ratings firms says stress in the U.S. energy sector should not materially impact the credit profiles of large consumer lenders with national footprints, says Fitch Ratings. Furthermore, the credit outlook for U.S. ABCP (Asset-Backed Commercial Paper) for the remainder of 2016 remains stable.
Fitch Ratings says the recent evidence of weakening consumer credit performance in energy producing regions more likely represents a reversion to mean after years of high growth instead of a substantive downturn.
Most states with the highest exposure to the energy sector, aside from Texas, are less populous, and represent a relatively small percentage of national lenders’ portfolios. The seven states most often cited for their exposure to the energy sector – ND, TX, OK, WY, LA, and AK – collectively represent only 12.4% of the US population.
Although Fitch believes job losses in the energy sector could accelerate if the recent rebound in oil prices is not sustained, initial jobless claims on a national level – a leading indicator for consumer credit losses – remain near historic lows. Unlike the fallout from the housing crisis in 2008, which impacted the majority of U.S. households and resulted in the evaporation of substantial wealth, Fitch believes that the sharp drop in oil prices has led to a broad transfer of wealth from energy producers to consumers. Lower energy prices provide a meaningful boost to consumer discretionary income, which all else being equal should support consumer debt payments.
Last month, Fitch affirmed 17 U.S. ABCP programs following the completion of its annual portfolio review. The rating actions were based on a review of the conduits’ portfolio compositions and the vehicles’ credit and structural protections such as transaction-specific and program-wide credit and liquidity support.
Outstandings across the 17 programs totaled $102 billion. Auto and commercial, trade receivables, credit cards and student loans account for most of the conduit holdings. Facility utilization rates across the portfolio were up from last year at 69%.
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