Weekly Wrap: Q2 earnings season kicks off

Last week, second-quarter earnings season kicked off, with Bank of America , Chase Auto , PNC Financial , Truist Bank , U.S. Bank and Wells Fargo Auto all reporting growth in auto loan volume and strong credit performance. Auto lenders will continue to report earnings this week, notably with Ally Financial and Citizens Bank reporting Tuesday. In this episode of the Weekly Wrap, Associate Editor Amanda Harris and Editor Joey Pizzolato discuss last week’s earnings reports and what to expect in the coming week. Subscribe to The Roadmap Podcast on iTunes , Spotify , or download the episode. Auto Finance Summit, the premier industry event, returns October 27-29 in Las Vegas. The Summit continues to bring together the best and brightest in the industry year after year for unparalleled networking and professional education. To learn more about the 2021 event and register, visit www.AutoFinanceSummit.com . Video Transcript: Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain . Joey Pizzolato 00:02 Hello, everyone and welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing is Monday July 19. And I'm Joey Pizzolato, editor of auto finance news. I'm joined by Amanda Harris, Associate Editor. And this is our weekly wrap on what happened in auto finance for the week ending July 16 2021. As always, I want to thank auto finance news advertisers, Alfa Agora Data, Dealertrack, defi Solutions, and Spireon for their continued support. Some good news this week from Taiwan semiconductor manufacturing CO, a chip maker, chip maker for our apple and a key partner to many of the world's biggest car makers. The company said that it will ramp up production of microcontrollers by close to 60% this year, which will help to greatly boost supplies for its automobile clients starting in the current third quarter. Sales are expected to increase 20% by the end of the year, but semiconductor supply is still expected to remain tight until at least 2022. On the inflation front, the consumer price index surged in June by the most since 2008. Topping all economists forecast and rising to 5.4% when compared to the same time last year, according to labor department data released this week. Us vehicles unsurprisingly accounted for 1/3 of the game in the consumer price index last month. The agency said the outsized increase in the June CPI was also driven in large part by pricing, rebound in categories associated with a broader reopening of the economy, including hotel stays, car rentals, the price of which are astronomical right now. apparel and airfare expectations that those increases will normalize help explain the Federal Reserve's view that inflation is transitory in auto finance, second quarter earnings season is upon us and Amanda and I looked into Wells Fargo auto chase auto Bank of America, US Bank and truce banks earnings this week. The upshot? Things are looking pretty optimistic for the industry this quarter. Chase auto and Wells Fargo auto for one reported positive trends across all metrics metrics, we tracked originations and outstandings increase on a year over year basis for Chase and wells which, truth be told probably wasn't a tall order, considering much of the second quarter of 2020 was marked by dealership closures and shelter in place orders. Credit performance, though, has continued to hold strong, largely due to increased consumer liquidity. delinquencies, delinquencies, trended lower at Wells, Chase, PNC financial and US Bank in charge off rates remain lower on a year over year basis across the board. not so surprising to was news that banks are increasing their focus on digital channels. Amanda has the breakdown. Amanda Harris 03:00 Yes, I'm so already seeing a trend this quarter as well, where banks that have been kind of prioritizing their digital capabilities really are, you know, just benefiting from that like every pretty much every quarter, you know, lately. But coming out of pandemic, we know that there was even more of an emphasis on offering, you know, mobile apps and you know, the ability to do much of your banking online. I mean, for years, it's been going that way. But it became crucial during the pandemic. So it's not really that surprising that a year later, they're kind of reaping the benefits of all that investment. And they really took the time to do. So for when making America, for example. They they also saw both, you know, just a pretty big uptick in their digital unit sales. So sales that were done, you know, online, things like that through online applications, they had about 1.1 or 1.4 million, excuse me, of those you'd like in units in the second quarter, which is a 26% increase from where it was the prior year. And it's up 50% as well from q2 2019. So even before it's up from pre pandemic as well, again, not surprising, considering they've been investing toward that and wanting that to be where the majority of their business goes. And the auto side, they also completed 77% of direct vehicle loan sales through digital channels. And we don't have a comparison number for that. They decided to break that out this time in commentary, because it seems like that's also been, you know, focus. We know car sales are insane right now. So I'm sure you know, people had to go online to buy cars recently. I mean, you need to go to lots now it's hard to find them on lots. So you're going to turn to online and maybe find one that's, you know, maybe an hour or two from you, but if they have the car you want. So that's probably driving at least part of that and then just making it easy for consumers to You know, get financing online. We know as banks and other lenders make that easier, they're gonna see more business come that route. Because I mean, it takes a lot less time than sitting in an f&i office for hours. So we've been kind of talking about that trend forever. And this is a good example of the benefit of kind of investing in that side. And the bank also saw their digital user users grow their household to, you know, bank with Bank of America, they saw about 70% were digitally active, which is increases, like 200 basis points year over year. So that went up, some and more people are using their digital assistant, which I thought was interesting, because people don't really like to be on the phone as much now. So as more lenders offer and like a kind of a smart assistant, where you can go and like use a chat, but it's more like a chat that's a little bit smarter is AI, it can answer your questions more specifically, instead of just giving you canned responses. So as more as those pop up more, I think we'll see that trend as well. True is also that's about to come out with today. So we'll close that soon. But they saw the same thing. You know, they saw you know, users go up on their their app, they saw more digital transactions, and they're actually have been working on combining their, their bV and T clients. And their and I'm blanking on the second one right now. SunTrust and bb&t and SunTrust, they're going to combine those clients onto one mobile, like digital platforms, they've been working to kind of like bring everybody in after that bank was formed by that merge. They've been working on that for a while. But now it looks like this month, we're ready to actually launch it with all their clients. So they hope to have at least 500,000 signed up to that new combined digital platform by the end of this month. And then they're going to add them in ways for the rest of the year. Just kind of their big thing they've been working on that for, like I said for a while to bring all their clients onto one platform as branded, truest. And that will get them like up to today's standards of capabilities and all that in that one platform. So that's kind of what's going on on the digital side. Lots of fun things happening so far. And that's just for two earnings. So who knows what else we're gonna see Joey Pizzolato 07:21 soon, right? next week. Um, you know, another busy schedule of earning call earnings calls we have ally financial capital one auto finance Citizens Bank, and Fifth Third. Um, you know, looking ahead, Amanda, and the trends we've been seeing just this week alone, you know, what, what are you what are your expectations for, you know, these these earnings coming up next week, similar trends as it relates to, you know, originations, credit performance, digital focus. Amanda Harris 07:49 Yeah, I think we'll, we'll definitely see similars, especially on the originations not standing growth, like he's ever comparing this to, you know, a time last year when things were like shut down. So obviously, everyone's gonna be up quite a bit. But I think it's more interesting look at, you know, where they were even based on this time, in 2019, we're seeing a lot of growth based on that comparison to which you can argue is a little bit more fair, because we know like it said, auto sales are still really strong. Now, as we get into the following quarter, so its second quarter probably gonna be strong, because that doesn't get into the following. When I'm looking forward. We know already there's been some slowdown in car sales prices are kind of starting, you know, to even out a little bit. So crazy high, they're going to be high for a while, but they are not going up quite as much each week and each month. So we're kind of getting into that. And we're getting, we're starting to see sales dip a little bit, because inventory is just so tight. We've covered that before and talked about it before on here. But I think that might, we might start seeing an impact within the next quarter to release by the year end, when we can because I know it's like looking back. But we'll definitely by q4 I think see the impacts of the kind of fallback and sales we may not see these like huge numbers year over year, like we haven't seen, but I think we'll still see growth. Because from everyone I talk to the demand isn't likely to go away, rest of this year. So yeah, that's what I think I'll see you on that side. On the digital side, I do think we're gonna see more especially with the banks and credit unions, because they have definitely put a big emphasis on digital. Because obviously, unlike an OEM like a digital bank is going to have a lot more reasons for someone to interact with them online. Because you're doing your actual banking through there, or, you know, your head may have your mortgage with them too. So you're going to have more than just a car loan, you're going to be interacting with them digitally in a whole different different way than like you would with maybe a captive. So I think we'll see that that more too as we see more of the larger banks come out Joey Pizzolato 09:58 to agree with you. And you know, one thing Remember is, we're starting to see the effects of pent up demand in the third quarter of last year. So as we kind of, as you mentioned, see kind of this cooling of demand that sort of started in June. If that continues through the summer, obviously, August is a big month, we'll see if that kind of shakes out to continuing to be strong, or if the inventory challenges will will really kind of cripple auto sales. But I would imagine we would see, you know, going into the third quarter, and even the fourth quarter, kind of like you said, less year over year growth, because because of the changes in demand. It does kind of lean that way. All right. Well, thanks, man. As always, that about wraps us up for this episode. Thanks for joining us on the roadmap. Please rate us on whichever platform you use to listen. Follow us on Twitter and LinkedIn and we will see you online at auto finance news dotnet and here next time

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