GM Financial originations up 1%, loan share shrinks

GM Financial ’s origination volume was flat in the second quarter as the captive’s loan share declined, even as retail sales improved and General Motors increased incentive spend. Loan originations totaled $9.1 billion in Q2, flat sequentially and up 1.1% year over year , according to the lender’s earnings presentation today. North American originations were flat YoY as higher General Motors retail sales and elevated average loan amounts were offset by lower U.S. loan share. General Motors sold 691,978 vehicles in Q2, up 19% YoY as inventory improved, according to the manufacturer. By comparison, vehicle sales industrywide were up 17% YoY in Q2, according to Cox Automotive . GM’s average incentive spend rose by 14% YoY to $2,006 per vehicle, with the average transaction price up 4% YoY to a record $52,451, according to Cox. GM U.S. sales performance for Q2 2023

[caption id="attachment_58331729" align="aligncenter" width="2048"] Source: Cox Automotive [/caption] Loan outstandings climbed 3% sequentially and 13.9% YoY to $69.7 billion, according to GM Financial’s presentation. The captive’s U.S. retail loan share fell to 42.9%, down from 50.8% in Q1 and 45.2% in Q2 2022. “We've tried to keep inventory consistent; we've grown [supply] to get it to the lower end of that 50- to 60-day range that we're working on,” Paul Jacobson , GM’s chief financial officer, said during today’s earnings call. GM has been disciplined when it comes to incentives and gaining market share while protecting margins, he said. Lease originations tallied $4.6 billion, up 18% quarter over quarter and YoY, driven by a 27.3% YoY increase in U.S. leasing volume along with improved retail sales, increased lease sales mix and higher amounts financed on average, according to the presentation. Outstandings fell to $31.6 billion, a decrease of 1% sequentially and 10.5% YoY. The U.S. lease return rate sat at 5% in Q2, down from 10% in Q1 but up from 1% during the same period a year ago. GM Financial’s total outstanding portfolio grew to $101.3 billion, up 1.8% QoQ and 5% YoY.

Credit performance followed expectations, with loans 31 to 60 days delinquent at 1.8% of the portfolio, flat with the prior quarter and a year ago, according to the presentation. Loans 61-plus days past due sat at 0.6%, up 10 basis points (bps) QoQ and flat YoY. Net charge-offs ticked up 20 bps YoY to 0.8% amid lower recovery rates but remained flat compared with Q1. Retail allowance for loan losses totaled $2.2 billion, or 3.1% of the portfolio, flat with Q1 and down 10 bps from a year ago, “reflecting portfolio credit mix and expectations for credit performance, recovery rates and economic outlook,” according to the presentation. The captive’s earnings before taxes (EBT) totaled $800 million, a decrease of 27.3% YoY, according to the presentation. The dip in EBT is “in line with expectations and primarily due to a higher cost of funds and lower net leased vehicle income, partially offset by increased finance charge income from portfolio growth and a higher effective yield," Jacobson said on the call. The captive paid a $450 million dividend to General Motors in June, according to the presentation. Increased liquidity GM Financial’s available liquidity totaled $33 billion in Q2, up 11.9% sequentially and 7.5% YoY, according to the presentation. Ending earning assets increased 3.2% QoQ and 8.3% YoY to $112.8 billion driven by increased retail and commercial loan activity. On the commercial side, GM Financial’s commercial receivables came in at $11.5 billion, up 8.5% sequentially and 49.4% YoY driven by increased new-vehicle production and an improvement in penetration according to the presentation. Floorplan financing penetration in the United States rose to 44.2% with 2,421 dealers in Q2 compared with 42% with 2,354 dealers in Q2 2022. Meanwhile, GM Financial securitized $1.5 billion in prime auto loans July 11, according to Finsight , which monitors securities. Shares of General Motors Co. stock [ NYSE: GM ] were trading at $37.68 as of 1:51 p.m. ET today, down 4.12% from market open. General Motors has a market capitalization of $52.38 billion. Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas. To learn more about the 2023 event and register, visit autofinance.live / afs / .