Despite expectations that auto finance revenues, margins and returns will decline from “exceptional to average,” Capital One Bank remains committed to the auto finance business.
CEO Richard Fairbank said on yesterday’s first quarter earnings call that the bank had developed “proven underwriting and customer service capabilities and we expect that the auto finance business will continue to deliver.”
He said the bank will continue to keep a close watch on the underwriting practices that are going on in the business.
He also said that subprime is “pretty flat” right now, and that the bank will “continue to grow in the prime space.”
As other banks have likewise indicated during this week full of earnings calls, Capital One’s auto growth strategy will likely be focused on further penetration of the bank’s existing dealers that it has good relationships with.
Fairbank was asked about potential changes to the competitive landscape thanks to the two recent high-profile initial public offerings from Ally Financial and Santander Consumer USA.
“We see two players that are now out there with IPOs and they are going to be intensely trying to generate growth. I think we feel pretty good about our position here, resilient and well above hurdle returns,” he said.
For the first quarter of 2014, Capital One‘s auto loan portfolio grew to $33.9 billion, up from the $27.9 billion the bank reported the same time last year. The bank said consumer auto average loans increased $963 million, or 3%, to $32.4 billion.
The bank said its auto originations increased from the fourth quarter of 2013 and remain on a strong growth trajectory. Subprime originations were relatively stable, while prime originations grew as the bank captured additional prime share from its existing dealers.
