Capital One Auto Finance Inc. experienced a drop in fourth-quarter auto loan originations which mildly tempered a year that, otherwise, was all up.
Fourth-quarter originations were down 5% compared to the same period the year prior, but full year-end originations were up 8% to $28 billion, according to the company’s earnings report.
“The competitive intensity steps up a bit in the fourth quarter, which is why our origination volume was down off the kind of unusually high levels of a year ago when the competition had backed off quite a bit,” Richard Fairbanks, chief executive of Capital One Financial Corp., said on the earnings call. “But I think we’re still seeing, generally, performance that’s consistent with the middle of the cycle and something that confirms our own confidence and happiness about our own choices and our performance.”
Total auto outstandings were up 13% to $54 billion making Capital One the fastest growing bank in the top five. Fairbanks attributes that growth to competitors pulling back in the space more so than any underwriting changes.
Average Fico scores have remained consistent for the bank through this growth period with 51% of loans going to borrowers with scores of 660 or higher. Capital One’s subprime portfolio of loans to consumers with Fico scores of 620 or lower has remained at 31%.
However, portfolio growth also brought higher losses and delinquencies. Net charge-offs accounted for 1.86% of the total yearend auto portfolio, up from 1.69% in 2016. Likewise, borrowers 30 days or more delinquent on their loans made up 6.51% of the overall portfolio — a 39 basis point rise year over year.
“On auto nonperforming loan side there was a [one-time] impact,” Fairbanks said without elaborating in great detail about what the adjustment was. “We made an accounting adjustment to include some of the repossessed assets as loans.”
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