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.