Higher yields offset lower auto origination volume at Ally Financial Inc. in the first quarter.
Year over year, originations fell 8.2% to $9 billion in the quarter, while average yields grew 59 basis points, to 5.85%.
The company remains “generally comfortable” with the size of its auto portfolio, Chief Executive Jeffery Brown said in an earnings call this morning, emphasizing the company’s “very disciplined” credit.
The company highlighted the increase in average yield, achieved by originating “a little less super-prime and a little less subprime,” Chief Financial Officer Christopher Halmy said on the call.
“More importantly, we were able to do this by only taking 7 basis points more of credit risk,” Halmy said. The company saw the best opportunity in the middle of the credit spectrum, he added.
Despite the shift in credit mix, delinquencies and net charge-offs inched higher year over year, to 2.2% and 1.08%, respectively. The company expects delinquencies to “tick up” throughout the year, as delinquencies are generally at their lowest in the first quarter, Brown said.
Meanwhile, Ally is expanding digital offerings — as evidenced by its acquisition this month of digital wealth-management platform TradeKing Group — while remaining committed to auto finance as its core product, Brown said today. However, for a variety of reasons, including Uber’s impact on car sales, the indirect model is ever-changing, he said, and may not have the same abilities to grow even five years from now.
“Tech is playing a greater role in [the auto] sector, and consumer preferences are shaping how vehicles are purchased, sold, and financed,” Brown said.
Brown pointed to the bank’s recent partnership with Beepi to provide used-leasing for the online buy-sell platform, as an example of that digital growth within auto.
Learn more about the tech and disruption in the industry at Auto Finance Innovation 2016, May 11 in Fort Worth, Texas. Visit www.autofinanceinnovation.com and to learn more about the Auto Finance Risk & Compliance Summit, visit www.afrcs.com.
