Listen: Banks pull back on auto in Q4

Banks last week announced in their earning calls plans to continue pulling back on auto lending as interest rates constrained vehicle sales amid improved supply. Citizens Bank , Fifth Third and PNC Financial all saw declines in their auto portfolio. Citizens Bank, for one, expects a $3 billion runoff of its auto book in 2023, and Fifth Third expects its portfolio to shrink by 16% this year . Truist was an outlier last week, reporting a 5.7% increase in its portfolio . Meanwhile, United Auto Credit staff members were insulated from Vroom layoffs , and Consumer Portfolio Services updated its automated decisioning tool . In this episode of the Weekly Wrap, Deputy Editor Amanda Harris and Editor Joey Pizzolato discuss ongoing Q4 earnings and what is to come in the week ahead. Subscribe to The Roadmap Podcast on iTunes , Spotify , or download the episode. Auto Finance Summit East, Auto Finance News’ new spring event, kicks off May 10-12 at the JW Marriott Nashville featuring a fireside chat with Peter Muriungi, CEO of Chase Auto. Visit autofinance.live/afs-east . Video Transcript: Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Joey Pizzolato 0:02 Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing. It's Monday, January 23. And I'm Joey Pizzolato, joined by Amanda Harris, this is our weekly wrap on what happened in auto finance for the weekend in January 20 2023. In general economic news, US retail sales posted the largest decline in the last 12 months and business equipment production slumped. heightening concerns that the economy is losing momentum as the Federal Reserve continues to tighten monetary policy. The the value of overall retail purchases broadly decreased 1.1% in December after a downward Lee revised 1% Drop in November. According to data from the Commerce Department. Separate figures show a 1.3% decline in factory output in December, wrapping up the weakest quarter for manufacturing since the onset of the pandemic. In auto finance vehicle sales remain mixed across the country at the end of 2022. As holiday traffic bolstered sales in some regions but higher interest rates dampen consumer meant consumer demand excuse me for houses in autos. The Federal Reserve System when last Wednesday released the January edition of its base Beige Book based on data collected as of January 9, the Beige book reports on 12 USDA districts categorized by cities and represented by the Federal Reserve Bank's auto sales volume increase in regions served by the Atlanta Fed San Francisco fed and Minneapolis Fed. The uptick was driven in part by higher traffic around Thanksgiving and in December. Sales of new vehicles were quote modestly higher reported by the New York Fed largely due to an improve provement in supply although us vehicle sales soften. vehicle inventory overall is slowly rebuilding as consumer demand cools according to the Fed. Meanwhile, new vehicle average transaction prices finished 2022 at a record high following three months of increases while incentives ticked up but remain historically low. ATB for new vehicles increased 1.9% month over month to just over $49,500 4.9% increase year over year. According to Kelley Blue Book. The number of weeks required to buy a new car increased to 44 weeks in December compared with 43.3 weeks in November. Also last week in auto finance, United Auto credit was insulated from rooms layoffs, layoffs that saw cuts representing 20% of their staff and consumer portfolio services is gearing up to launch the latest iteration of its automated origination scorecard. CBS in the first quarter is launching its generation eight origination scorecard model, which is quote the brains of the letter lenders credit decisioning model works with 25 Plus algorithm algorithms. That's a hard word to decide who to approve, who to decline, what rate to give them, what structures the field consumers are going to get. And it's all done in less than two seconds. President Chief Operating Officer and Chief Legal Officer Mike Levin said last week's biggest stories however, were more earnings. I mean, know what's going on there.Amanda Harris 3:19 Or so earnings results again, were kind of mixed across the board this past week so truest actually grew. Its auto book on a year over year basis in the fourth quarter auto outstandings clocked in at 28 billion, which is down 1% sequentially, but up 5.7% year over year, the bank does expect auto production too slow in 2023. And that is kind of in line with the other earnings that we saw on this week. So the third, their auto book fell 1.4% year over year to 16 point 6 billion and the bank projects auto originations will likely sum about 16% this year compared with last year to about 6 billion. So that's kind of where things will land looking ahead. And then PNC financials auto book also shrinking q4 outstandings, were down 10.8% year over year to 14 point 8 billion. So continuing the trend and banks just not really seeing a ton of growth in their auto books. And you know, just with the little exceptions here and there of growth, depending on what they have going on. But credit performance also similar story pretty much everyone is starting to see you know, credit form is deteriorating or normalizing across the board, net charges and delinquencies are starting to go up. That was to be expected. No real big surprises there. But we are monitoring it. Um, everyone pretty much said they're preparing for what they're terming a mild recession. So we did see, you know, seeing some small upticks and allowance for credit losses if there's allowance accounted for about one point 13% of their outstandings and PNCs coverage ratio went up to 1.52% of our savings compared with 1.42 and q3 and 2.2 for a year ago. So we're starting to see that kind of, you know, come up a little bit just as they are preparing for potential uptick and delinquencies, net charge offs. And, you know, recessionary conditions down the road. That's really the story. There was happening earnings right now.Joey Pizzolato 5:07 Great. I couldn't have said it better myself and we have Huntington earnings going up this evening. So that should be ready for everyone and Capital One in US Bank and Tesla are set to report this week. So we'll be on the lookout for that. That about does it for today's episode. Thanks for joining us on the roadmap and be sure to follow us on LinkedIn. We will see you online and auto finance news.net in here next time

Listen: Banks pull back on auto in Q4

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