BMO Financial Group reported a 41% decline in its indirect auto loan portfolio year over year in the fourth quarter, which ended in October, according to the company’s earnings released today.
The Canadian bank’s portfolio now sits at $3.2 billion, down from $5.5 billion during the same quarter the year prior. Additionally, net income from its auto portfolio is down 3% year over year.
The decline is largely due to the sale of $1.7 billion from its auto portfolio in the first quarter that resulted in a $35 million loss on the sale, the company previously reported. Since that sale, the portfolio has continued to decline another $600 million.
In June, BMO revamped its flat-rate dealer compensation model to include a three-tiered system at 1%, 3%, and 5% rates that increase in sync with loan terms, Craig Harter, the company’s head of indirect auto finance, previously told Auto Finance News.
The company also instituted a push into more profitable near-prime credit bands earlier this year as other banks are pulling back in the space, Harter said. However, neither of those initiatives have resulted in portfolio growth or higher yield through the fourth quarter.
“We feel we have done a very good job of managing the dealers we’ve had, and enjoy a consistent return over the years,” Harter previously said. “But we feel, as we’ve seen other players retract from the market, that we have a great opportunity to not only better our business strategy with our commercial partners, but also just take advantage of the current market. We have the ability — with the experience and expertise we have — to build deeper.”
