Citizens One Auto Finance purposely decreased its portfolio by 5% in 2017 and expects another $2 billion to $3 billion runoff in the coming years to improve profitability, the company said during its fourth-quarter earnings.
Citizen Financial Group’s auto portfolio totaled $13.3 billion at the end of the fourth-quarter period, down from $14 billion during the same time the year prior. In the coming years the portfolio will “gradually” decline to $10 or $11 billion, Chief Financial Officer John Woods said on the call.
“Because [auto] … is a relatively short portfolio, we can use that as a shock absorber based on what other loan demand is out there in the marketplace,” Woods said. “Right now, we’re in a mode of withdrawing capital from that business.”
However, the lender is starting to see the benefits of its pullback strategy as yields are up 38 basis points year over year. That increase is, in part, attributed to the lender’s expansion down the credit spectrum into prime and near-prime loans rather than just super-prime, Craig Lamp, the bank’s head of auto lending, told Auto Finance News in June 2017.
Net charge-offs fell to $32 million, compared with $34 million the same period the year prior. Yet, the improved losses were due to gains in recoveries as gross losses remained flat year over year. As a percentage of the overall portfolio, charge-offs remain flat at 0.95%.
Additionally, the pullback has not lowered delinquencies. The number of non-performing assets in the bank’s auto book grew 40% to $70 million during the quarter.
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