Historical Data Helps Citizens Bank Improve 84-Month Loan Performance
Citizen Bank has accumulated a broad historical data set of its 84-month loan product, which has allowed it to become “one of our better performing segments,” Craig Lamp, the bank’s head of auto lending, told Auto Finance News.
“If you look at our data, we have been making 84-month loans even well before the financial crisis,” he said. “So, we have a fairly robust data set on it, and we actually have plenty of loans that have made it all the way through the cycle.”
The long-term loans still represent a smaller segment of the bank’s overall auto portfolio, and there are a lot of restrictions to ensure the credit concentration is right for the product, Lamp said. The increased risk and loan duration from 72 months to 84 months isn’t significant, so long as the credit criteria is controlled, he said.
Citizens Bank has been in a years-long process of “moderating” its auto portfolio — focusing on profitable loans rather than chasing volume — as well as moving to become a “full prime” lender, Lamp said. The bank is inching down into prime and nearprime, he explained, rather than focusing just on super-prime loans.
“We have been moving [down] into the whole prime space over the past four to five years — where we had historically been more of a super-prime player,” he said. “We’re enjoying the moves we have made. It’s a moderation consistent with the bank’s overall strategy and concentration.”
The lender’s loan balances remained flat year over year at $13.8 billion, according to its latest earnings report. However, Citizens is preparing for a decline in auto volume as other bank products, such as student loans and unsecured assets, take up more share.
“If you look at our structure in terms of the relative concentration of auto within our bank, we were a bit over indexed compared to most of our peers, and a lot of it was that the other products were underdeveloped,” Lamp said. “It’s been more of a gradual moderating down, but [auto] is still a big part of the bank’s overall strategy.”
