TCF Bank grew its auto originations by 12.8% in 2016, which brought its auto outstandings to 15% of its total portfolio, up from 4% back in 2012, the company disclosed in its Q4 earnings presentation on Friday.
However, due to lessening profitability returns, the bank said it’s considering pulling back on its auto portfolio to focus on other pillars of its business.
The bank originated $3.5 billion in auto loans and leases for the full year 2016 up from $3.1 billion last year. However, overall auto outstandings for the fiscal year only grew by $145,000 for a less than 1% gain.
Despite those origination gains, the company predicts some challenges in the coming year and signaled it would consider pulling back from its auto growth in 2017 if profitability from those originations does not improve, said Mike Jones, executive vice president of consumer banking.
“These reduced gains in the quarter on auto driven by market conditions were definitely below our expectations and where we feel they need to be from an acceptable return standpoint,” Jones said during the earnings call. “I think if the negative market conditions persist, we’ll need to manage to different outcomes, and while we were committed to the platform — the securitization platform –if we cannot generate an acceptable return, we’ll need to shift to our strategy.”
Some of the concern about “headwinds” in 2017 is related to industry-wide increases in delinquencies and charge-offs. TCF Bank saw auto delinquencies 60 days and over rise nine basis points to 0.23% of the overall portfolio in 4Q2016.
Rising delinquencies led to an increase in charge-offs, which grew 34 basis points to 1.09% of the overall portfolio.
“Charge-offs and delinquencies have increased in the auto industry,” Jones said. “As you have seen in the auto industry, we are not immune to that, so as that progresses those vintages are going to be impacted on what is going on in the auto industry.”
On January 19, the Consumer Financial Protection Bureau sued TCF Bank, alleging the company tricked consumers into “costly” overdraft services and obscured fees on their checking accounts. That suit is not connected to the bank’s auto division.
