Chase Charge-Offs Rise 47% Amid One-Time Change in Reg Guidance

Chase Auto Finance’s charge-offs climbed to $116 million in the third quarter, up from $79 million the same time the year prior, following a change in the treatment of customer bankruptcies, according to the bank’s earnings call today.

“Auto charge-offs included approximately $50 million of a catch-up reflecting regulatory guidance on the treatment of customer bankruptcies,” Marianne Lake, JPMorgan Chase & Co.’s chief financial officer, said on the call. “Excluding this, the loss rate in auto was only 41 basis points. In general, it feels like the auto market has plateaued at current levels with inventory, incentives, used-car prices, and SAAR all having stabilized over the last few months.”

Meanwhile, delinquencies were down. Delinquencies 30 days or more past due dipped to 0.93% of the portfolio in the quarter compared with 1.08% in 3Q16.

The bank’s third-quarter loan and lease outstandings reached $80.8 billion, a year-over-year increase of $5.3 billion. Yet, auto loan and lease originations for the quarter were $8.8 billion, down 5.4% from the same time the year prior.

“While we felt like we got ahead of the issues and tightened early, you’ve seen the industry generally moving in that direction [pulling back],” Lake said on the call. “We have been pressure-tested … and I think the industry and our portfolio performed really quite well.”

Additionally, Chase has not seen a “significant impact” from the Equifax security breach, Lake said. “[We are] under constant attack on the fraud side,” she said. “We have been constantly evolving and refining … and looking at data to better leverage our underwriting decisions.”

The recent Equifax breach revealed that sensitive personal information — including the Social Security numbers of an estimated 145 million consumers, almost half of the U.S. population — were stolen by hackers.

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