Despite shared profitability challenges, Ford Credit has greater portfolio stability than General Motors Financial (GMF), Moody’s says in a report released this morning.
Ford Credit’s annualized growth was 9.2% as of March 31, compared with GMF at 29.4% as of March 31. However, with GMF selling its European business to France’s PSA group in March, the lender’s expansion may pause temporarily, the report stated.
GM Financial has also been growing its loan portfolio at a fast pace, while Ford has pulled back slightly. GM’s total North American originations grew 19% in the first quarter compared to the same period a year prior. Ford, on the other hand, saw a 1% drop in year over year originations during the first quarter, due to declines in its lease portfolio.
Despite GM’s growth, Moody’s still feels Ford is better positioned for portfolio stability. With FICO scores below 620 representing approximately 12% of earning assets as of March 31, GMF’s charge-off rate is higher than Ford Credit’s due to its relatively higher portfolio of subprime assets.
In addition, GMF’s operating leases were 44% of total originations as of March 31, doubling Ford Credit’s lease penetration. Although GMF’s subprime concentration has declined significantly in recent periods, its originations still support GM sales as well as non-GM sales from the legacy AmeriCredit platform.
It’s worth noting that both companies are increasingly active in the ABS market. GMF’s launch of a prime ABS shelf in 1Q17 is a significant step in its transition to a full captive. Joining the securitization market in 1994, GMF has developed two shelves for retail loan securitization. AmeriCredit Automobile Receivables Trust is GM’s legacy shelf issuing subprime auto loan-backed securitizations, whereas GM Financial Consumer Automobile Receivables Trust is the new program issuing prime auto loan-backed securitizations. Ford Credit’s recent ABS, consistent with its longer standing as a captive, have similar pool characteristics to previous securitizations, the report says. In the first quarter of 2017, Ford issued two securitizations backed by retail loans and one securitization backed by leases, according to the report.
