Auto origination volume varied across banks in Q4

Origination volumes in the fourth quarter were mixed across the banks that reported auto lending metrics as some institutions tightened credit and prioritized other lines of lending while elevated interest rates continued to squeeze consumers. Two of the seven banks that reported Q4 origination volume tallied year-over-year increases, while four reported a decline. The auto lending landscape is “still a very competitive but rational marketplace,” Rich Porrello , director of consumer finance at Huntington Bank , told Auto Finance News . “Last year caused many lenders to exit the space, but it also caused some lenders like Huntington to double down again and remain in it.” Huntington reported Q4 originations of $1.2 billion, flat YoY. Ally Financial 's originations increased 4.4% YoY to $9.6 billion and Chase Auto 's originations jumped 32% YoY to $9.9 billion, according to their earnings reports. Bank of America , Capital One , U.S. Bank and Wells Fargo pulled back slightly in auto, leading to a YoY decline in originations. Wells Fargo reported the largest decline among the four, with originations down 34% YoY to $3.3 billion. U.S. Bank President and Chief Executive Andy Cecere said on the bank’s Jan. 17 earnings call that elevated interest rates, compressed interest margins and a competitive environment have prompted it to be “less aggressive” in certain lending categories, including auto. Fifth Third Bank intentionally scaled back auto lending due to high rates, but it expects auto production to pick back up this year as credit unions tighten lending and rates come down. Auto outstandings chart Truist is shifting further away from auto lending going into 2024 as it is deemphasizing low return portfolios, Chief Financial Officer Mike Maguire said during the bank’s Jan. 18 earnings call. Truist reported indirect auto outstandings of $23.4 billion, down 17% YoY . Providence, R.I.-based Citizens continued its planned auto book runoff after exiting indirect auto lending in June. Auto outstandings declined 3.3% YoY to $8.2 billion in Q4, according to the bank’s earnings supplement. Credit performance continues to normalize Credit performance across the industry worsened in Q4 as the uncertainty of the economy weighed on consumers, Huntington’s Porrello said. “There's been a lot of discussion of a soft landing, heavy landing or a recession in 2024, so that's on many consumers’ minds,” he said. Huntington originates auto loans in the prime and super prime credit tiers, so performance has remained strong as unemployment levels have been positive, Porrello said. “Our auto book continues to perform well from a delinquency and a loss standpoint. [Delinquencies are] still at or below where we were in 2019, so that creates a bit of a tailwind for us to continue to drive more production in the space,” he said. Accounts 30 to 89 days delinquent came in at 0.96% in Q4, up seven basis points YoY, according to the bank’s earnings presentation. Delinquencies increased at every bank except for PNC during the fourth quarter. PNC’s auto loans 30 to 59 days past due came in at 0.61%, a dip of 10 basis points (bps) YoY, according to the bank’s earnings supplement. Net charge-offs also increased at every institution except for PNC and U.S. Bank. Although performance continued to worsen throughout the industry, Capital One, Chase Auto, Huntington, PNC and Wells Fargo reduced their allowance for credit loss ratios, but Ally and U.S. Bank increased coverage ratios. Outlook for 2024 Consumers’ financial health is likely to remain strong in 2024 even as spending pressures remain and their cash on hand shrinks, JPMorgan Chase Chief Financial Officer Jeremy Barnum said during the bank’s Q4 earnings call. “Consistent with that soft landing view … it is a very strong labor market,” he said. “A very strong labor market means, all else equal, strong consumer credit.” PNC is expecting a mild recession in the middle of 2024, with a contraction of less than 1% in real gross domestic product, Chief Financial Officer Robert Reilly said on the bank’s earnings call. “We expect the federal funds rate to remain unchanged between [5.25% and 5.5%] through mid-2024,” Reilly said. “When the Fed begins to cut rates, we expect a reduction of 75 bps in 2024, with a 25 bps decrease in July, November and December.” Huntington believes this year could be positive for the auto finance industry, Porrello said. “As we look to 2024, we feel really good about the business, the competitive nature, the strength of the consumer, the strength of the dealer, and 2024 will be a dynamic year for us in the space,” Porrello said. “Interest rates will come down toward the latter half of the year, to what degree is yet to be determined,” he said. “There are consumers that are holding out from purchasing and financing, because rates are high, and it's causing payments to be high. [Lowered interest rates] could bring them back to the marketplace.” Early-bird registration is now available for the second annual Auto Finance Summit East , May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross section of industry players. Early-bird pricing ends March 15. Visit AutoFinance.Live to learn more.

Auto origination volume varied across banks in Q4

Ally Financial and Chase Auto were big winners

Podcast: ‘Weekly Wrap’ on Vroom, Sonic Automotive closures

Marine discounts on the rise

Related Posts

CPS’ originations fall 12.3% in Q3

Vroom subsidiary UACC’s originations up 7%

Open Lending certified loans fall 13%

Marine discounts on the rise

Stay Informed with Our Newsletters

The Roadmap Podcast

SPONSORED

Driving Innovation in Automotive Refunds: How Onbe and Allied Solutions Are Modernizing the Payment Experience

Navigating the Margin Squeeze: EVs, Tariffs & Pricing — A Q&A with Earnix

Enhancing credit approaches to boost conversion and dealer loyalty

Welcome Back!

Retrieve your password