COVID-19 continues to hamper vehicle manufacturing, leading to a decline in floorplan assets at Huntington Auto Finance.
The bank’s U.S.-based vehicle floorplan outstandings declined 27.2% year over year to $1.7 billion in the fourth quarter, but clawed back from last quarter when outstandings stood at $1.6 billion, according to the recent earnings presentation.
Inventory woes are likely to last several more months, driven largely by periodic manufacturing plant shutdowns related to COVID-19, Chief Executive Stephen Steinour said on the fourth-quarter earnings call. “We do see supply chain disruption impacting utilization. It’s very clearly happening in the dealer floorplan side. It improved a bit in the fourth quarter, [but] … it will probably be several quarters before it becomes normalized,” he said.
Ally Financial and Bank of America also experienced declines in credit lines for auto dealers in the fourth quarter, according to their earnings.
On the consumer side, Huntington Auto Finance’s originations declined 26% YoY to $1.4 billion in the fourth quarter, while the bank’s vehicle outstandings remained flat during the same period in 2019 at $12.8 billion, according to the earnings presentation. More than half of originations in the fourth quarter were for new-vehicle purchases; the prime lender exited leasing in 2008.
Meanwhile, Huntington uses technology to automatically provide loan decisions for more than 70% of the bank’s applications based on FICO and other custom factors, according to the presentation. In the fourth quarter, the average credit score declined to 774 from 781 a year ago, and from 777 last quarter.
The bank’s average loan-to-value ratio of 86% is a decrease of 200 basis points from the previous year.
Delinquencies for auto loans 30-plus days past due came in at 0.90%, a decrease of 5 bps from the same period a year ago. Ninety-day delinquencies stayed flat YoY at 0.07%. Net charge-offs clocked in at 0.21% of auto loans, a decrease of 9 basis points YoY.
Huntington has joined other lenders in decreasing the number of loans in deferral programs since the start of the COVID-19 pandemic. As of Dec. 31, less than 1% of the bank’s consumer loan portfolio, $66 million, was in deferral, down from 5% of the portfolio in June. Most of the bank’s deferred consumer loans are for mortgages.
“Our deferrals in auto, RV/marine, and home equity have nearly all lapsed and we are managing these portfolios consistent with our pre-pandemic strategies,” Steinour said on the call.
At the end of 2020, Huntington’s total auto originations clocked in at $5.9 billion, a 3% year-over-year decrease. The annualized net charge-off rate was 0.26%, flat with the end of the year in 2019.
Meanwhile, on the powersports front, RV and boat outstandings declined 16% YoY to $4.2 billion, up from $4.1 billion last quarter. Delinquencies at 30-plus days past due increased 2 bps from the same period a year ago and 15 bps quarter over quarter to 0.54%. The 90-day past due rate of 0.06% is an increase of 1 bps YoY and sequentially.
Yearend powersport originations clocked in at $1.6 billion for 2020, an increase of 60% YoY, with a net annualized charge-off rate of 0.31%, a decrease of 2 bps from yearend 2019.
Shares of Huntington Bancshares Inc. [Nasdaq: HBAN] were trading at $13.62 as of 2:45 p.m. ET, up 1.04% since market open. Huntington has a market capitalization of $18.86 billion.
Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com.
