OneMain Financial grew its auto portfolio in the third quarter largely driven by an increased focus on direct lending, the company said during its earnings call last week.
The financial institution ended the quarter with $2.7 million of direct auto receivables, which is 19% of the company’s total portfolio, up from 13% of the total portfolio during the same period the year prior, said Scott Parker, OneMain’s chief financial officer.
However, because direct loan deals tend to have a lower annual percentage rate (APR), the company’s income was impacted. Although yields were relatively flat year over year across the company’s total portfolio, interest income came down as anticipated due to the higher share of direct loans in the portfolio.
“Well, I think we’re growing both [direct and indirect] parts of the portfolio,” Parker said. “There is clearly a need for the [direct] product. It’s both a good product for our customer and profitability for us. But the overall book is continuing to grow and the component parts of the portfolio will continue to grow, just at different rates.”
Additionally, yield was reduced by $7 million because of impact from the hurricane-related borrower assistance programs.
In October, reports of a possible acquisition of OneMain Financial surfaced. There are a number of parties interested in buying the company, including rival lenders and private-equity firms, according to anonymous sources cited by The Wall Street Journal.