(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: 2016 Outlook: Canada Structured Finance
(Macroeconomic Factors Pose Risk to Stable Outlook)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874216
NEW YORK, December 10 (Fitch) Numerous macro concerns will be foremost on
Canadian investors' minds in the coming year, though none should dent the stable
outlook for Canadian structured finance, according to Fitch Ratings in its 2016
outlook report.
Fitch projects stable credit performance across all Canadian structured finance
sectors next year, with all sector Rating Outlooks either Stable or Positive.
Securitization activity will continue to increase, with new deals likely to
emanate from the ABS and CMBS sectors. That said, the aforementioned macro woes
bear close watch, according to Managing Director Michael Dean.
'High household leverage is a notable risk to the Canadian economy with the
ratio of debt to disposable income at a record high of 164% in 2015,' said Dean.
'Canadian consumers are facing higher household debt due primarily to rapidly
rising mortgage borrowing .' This, however, should not affect performance of
Canadian credit card ABS, with delinquencies and chargeoffs still exceptionally
low and monthly payment rates often in excess of 30%.
Fitch views Canadian home prices as much as 20% overvalued. That said, 'The
economy is in a good position to weather a housing downturn primarily because
the mortgage market does not have significant exposure to riskier mortgage
products that would be at high risk of default,' said Dean. That sentiment is
unlikely to change in the foreseeable future. Despite efforts to develop an RMBS
market in Canada, there were no securitized deals in 2015. This makes covered
bonds likely the only RMBS market in Canada for the foreseeable future, with
issuance among the big banks likely to remain brisk.
Fitch sees no material risks for Canadian auto ABS next year despite concerns
about some areas of the broader economy. Canadian consumers are showing great
discipline in paying their auto debts, which along with a healthy wholesale
vehicle market will support asset performance in 2016. The same stable outlook
for next year holds true for Canadian CMBS.
'2016 Outlook: Canada Structured Finance' is available at 'www.fitchratings.com'
or by clicking on the above link.
Contact:
Michael Dean
Managing Director
+1-212-908-0556
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY, 10004
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email:
sandro.scenga@fitchratings.com.
Additional information is available on 'www.fitchratings.com'.
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