GM Financial loan originations up 12% amid strong sales, penetration

Higher retail sales along with an increase in average loan amounts financed and a stronger share of U.S. loan financing boosted GM Financial ’s originations in the first quarter as leasing improved on a linked-quarter basis. Loan originations tallied $9.1 billion, an increase of 9.6% sequentially and 12.4% year over year , according to GM Financial’s earnings presentation today. North American originations climbed 13.3% YoY. General Motors sold 599,187 vehicles in the United States in Q1, up 18% YoY, according to Cox Automotive . GM U.S. sales performance for Q1 2023

[caption id="attachment_57337401" align="alignnone" width="2048"] Source: Cox Automotive [/caption] Loan outstandings clocked in at $67.7 billion, an increase of 3.7% quarter over quarter and 13.8% YoY, according to the captive’s presentation. GM Financial’s U.S. retail loan share reached 50.8% in Q1 compared with 43.2% in Q4 2022 and 44.2% in Q1 2022, driven by incentives and a higher share of U.S. floorplan financing , according to the presentation. “Higher effective yields on new originations and growth in the loan portfolio” offset the effect of higher costs of funds compared with 2022, General Motors Chief Financial Officer Paul Jacobson said during today’s earnings call. Credit performance was in line with an expected decline and seasonality, according to the presentation. The rate of loans 30 to 60 days past due stood at 1.8%, a decrease of 30 basis points (bps) sequentially but up 10 bps YoY. Loans 60-plus days delinquent came in at 0.5%, down 20 bps QoQ and flat compared with the prior year quarter. Net charge-offs accounted for 0.8% of the loan portfolio, a decrease of 10 bps sequentially but up 10 bps YoY. Allowance for loan losses totaled $2.1 billion, accounting for 3.1% of oustandings, down 1 bps both sequentially and YoY “reflecting continued improvement in credit mix,” according to the presentation. Lease originations tick up GM Financial’s lease portfolio benefited from higher GM retail sales and higher amounts financed on average, according to the presentation. Lease originations tallied $3.9 billion, an increase of 11.4% both QoQ and YoY. Outstandings fell 2.8% sequentially and 13.1% YoY to $31.8 billion. The captive’s total outstanding portfolio landed at $99.5 billion, an increase of 1.5% QoQ and 3.5% YoY. The U.S. off-lease return rate reached 10% in Q1 compared with 9% in the prior quarter and 1% in Q1 2022, according to the presentation. The lender’s earnings before taxes (EBT) totaled $771 million, a decline of 40% YoY “primarily due to the expected decrease in net leased vehicle income driven by lower lease sales mix as a result of reduced new vehicle production since Q3 2021 and lower net gains on lease terminations,” Jacobson said. Meanwhile, GM Financial’s commercial receivables totaled $10.6 billion in Q1, a 6.1% sequential decrease but up 43.2% YoY on the heels of inventory growth and increased penetration, according to the presentation. The lender increased its U.S. floorplan penetration rate to 43.6% with 1,851 U.S. dealers, up from 41% and 1,764 dealers in Q1 2022. Liquidity down 3% YoY The financier’s available liquidity was $30 billion in Q1, up 1.7% QoQ but down 2.6% YoY, according to the presentation. Ending earning assets, including retail loans and leases as well as commercial loans, tallied $110.2 billion, an increase of 0.82% sequentially and 6.5% YoY. “GM Financial’s key metrics balance sheet and liquidity remained strong, providing them the ability to support the GM enterprise across economic cycles,” Jacobson said. The captive paid a $450 million dividend to General Motors during the quarter, according to the presentation. For the full year, GM Financial’s expected EBT is “in the mid-$2 billion range, and dividends similar to 2022 have not changed,” Jacobson said. Coming off the failures of several regional banks in March, GM Financial has seen “no material impact due to the recent banking crisis,” Jacobson said, noting that the lender renewed its $16 billion revolving credit facilities and received an upgrade on bond ratings from Moody ’s. “This upgrade should improve credit spreads on future bond issuances , and improved cost of funds as their debt portfolio reprices,” he said. Shares of General Motors Co. stock [ NYSE: GM ] were trading at $32.91 as of market close today, down 4.02% from market open. General Motors has a market capitalization of $45.9 billion. Auto Finance Summit East, Auto Finance News’ new spring event, is set for May 10-12 at the JW Marriott Nashville featuring a fireside chat with Peter Muriungi, CEO of Chase Auto. Visit autofinance.live.

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