Bank of America Indirect Credit Performance Deteriorates
Bank of America Corp. showed marked deterioration in its auto finance portfolio last quarter, as the Charlotte, N.C., increased its allowance for losses for the unit.
Net charge-offs in the unit increased $195 million to $1.2 billion as the loss ratio remained flat at 5.03%, but up 100 basis points excluding Merrill Lynch. BofA increased its allowance for credit losses to cover 5.40% of its loans. Specifically, the Dealer Finance portfolio of $40.1 billion had a 26 basis point increase in loss rate to 2.78%. The auto portfolio of $26.7 billion , meanwhile, had a 46 bps increase in loss rate to 2.48% — that’s a big number. It should be noted that this portfolio includes auto originations, auto purchased loan portfolios and marine/RV.
The one bright spot were 30-day-plus delinquencies, which decreased 61 basis points to 4.16% of loans, although they were up 24 bps excluding Merrill Lynch. Ken Lewis, the bank’s CEO, said seasonality has something to do with this.
