U.S. Bank saw its auto lease outstandings grow by 34.8% in the second quarter compared to the same time a year prior, and has done so without expanding credit criteria, Terry Dolan, vice chairman and chief financial officer for the bank, said during its Wednesday earnings call.
“In the auto segment, our well established market position, full product offering, and strong dealer relationships provided strong growth in both lending and leasing,” Dolan said. “I want to emphasize that leasing growth is not coming at the expense of increased risk. We have not changed our underwriting in this business and are not enhancing residual values.”
The company’s lease outstandings stood at $7.2 billion at the end of the second quarter, up from $5.3 billion in the prior-year period.
However, leases are still a smaller segment of the company’s overall auto portfolio, which grew 12.5% year over year to $24.7 billion in the quarter. Outstanding retail loan contracts specifically grew to $17.5 billion — a 5% jump over the same 2016 period.
“We have made significant investments in this business over the past few years, which is coming to fruition in the form of increased market penetration with both dealers and manufacturers,” Dolan said on the call. “We expect growth will remain healthy for the next few quarters as we continue to penetrate market.”
Greater volume also brought higher delinquencies. The percent of borrowers 30- to 89-days past due grew to 0.73% of the portfolio, up from 0.48% in 2Q16. Delinquencies 90-days or more past due remained low, but doubled to 0.06% of the portfolio.
Still, the bank remains a prime lender with an average Fico at origination of 782, Dolan noted.
“That’s a very prime portfolio for us, we’ve always done it that way and we’ve stayed consistent in that area,” Bill Parker, vice chairman and chief risk officer for U.S. Bank, said on the call. “We expect it to remain fairly strong through the latter half of the year, so we continue to see good demand in auto loans and leases.”
