Capital One Auto Finance overtook Wells Fargo Auto as the third largest automotive bank lender in the market during the fourth quarter.
Meanwhile, Chase Auto Finance is on track to surpass Ally Financial Inc. as the No. 1 lender in total loan and lease outstandings, based on the pace set through September. Ally will report earnings tomorrow.
Despite a drop in Capital One’s fourth-quarter originations, the bank grew its portfolio to $54 billion by yearend 2017, while Wells Fargo’s declined to $53.4 billion. The two banks have been moving in opposite directions for more than a year after Wells Fargo implemented a strategy to reduce its portfolio to gain profitability.
“We have seen the value of some competitors backing off in the auto business,” Richard Fairbanks, chief executive of Capital One Financial Corp., said on the 4Q17 earnings call. “What is happening is we’ve had an unusually benign period of competition in the 2016 and 2017 period. We will look back at that and say, ‘It normalized from there,’ and I think that it’s just a natural thing.”
Capital One’s originations were down 5% in the fourth quarter year over year to $6.2 billion, reflecting an uptick in competition. Yet, yearend originations were up 8% to $28 billion, and Fairbanks expects that growth will continue, albeit at a more “normalized” pace.
“We generally like this part of the auto marketplace where it is, but it is noteworthy that in the fourth quarter we posted a lower origination than we have for some time now, and I think that’s just because [competition] is in fact stepping up a little bit,” he said. “What we do is we describe the conditions that we see in that marketplace, and as a company that doesn’t set growth targets, we work incredibly hard to create growth opportunities. At the end of the day, we take what the market will give us.”
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