GM Financial Sustains Loan Growth With 62% Origination Boost

General Motors Financial Co. continued its steep retail loan growth with a 62% yearly rise in originations, the company reported in its second quarter earnings for the period ending in June.

The captive originated $5.3 billion in retail loan contracts in the quarter, up from $3.2 billion during the prior-year period. This comes on the heels of an 87% increase in retail originations in the first quarter.

“The biggest piece of the growth was in U.S. financing of new GM vehicles,” Dan Berce, president and chief executive of GM Financial, said on the earnings call, which did not include a Q&A session. 

Lease originations saw a more modest year over year increase of 4.3% to $6.8 billion in the quarter. Combining retail contracts and leases, GMF’s total originations grew to $12 billion for a 23% increase, compared with the same period last year.

However, the boost in originations has not made a big splash for the total portfolio as outstanding retail finance receivables grew just 0.7% year over year to $31.1 billion.  

GM Financial continues to buck industry trends with a large 130 basis point reduction in its total delinquencies. During the second quarter, total delinquencies made up 4.9% of its total portfolio, down from 6.2% in 2Q16.

Losses did rise, however. The company’s net charge-offs totaled $130 million in the second quarter, up from $128 million during the same period last year. But, as a percentage of the overall portfolio, losses fell to 1.7% compared with 2.2% during the same period last year. 

“1.7% is the lowest our company has been,” Berce said. “We do expect seasonally as we go throughout the remained of 2017 the recovery rate will drop and become softer.”

Lower delinquencies can be explained in part due to a more than yearlong shift towards a more prime lending portfolio Berce added.

“Our retail loan origination mix in the U.S. continues to skew more and more toward prime,” Berce said. “In fact, for the June quarter, 59% of our loan volume in the U.S. was a prime origination up from 42% a year ago. The absolute level of subprime lending did increase year over year, but as a percentage of the total it did decrease to 26.7%, and we expect that trend to continue with more origination volume as part of the mix being prime.”