Recent subprime-auto bonds from Prestige Financial Corp. and Exeter Finance Corp. are performing worse than anticipated, at a time when many competitors are at least meeting expectations, according to credit raters, Bloomberg News reported. The challenges both face may be remnants of a push for rapid growth a few years back, when these smaller lenders temporarily loosened credit standards to compete against big banks for loan volume, S&P Global Ratings said in a report on Monday. Competition intensified from 2014 to mid-2016 as several subprime auto asset-backed security issuers offset lower profit margins with higher loan volume. “Certain companies may have sacrificed adequate controls and dealer oversight for the sake of growth,” S&P analysts led by Amy Martin said in a Monday research note. “Renewed growth in subprime lending, which began in the second half of 2018, could intensify competitive conditions and lead to weaker performance.”
