Wells Fargo Auto is looking to invest in better digital experiences as more than 80% of consumer deposits shift to online channels.
“Given the size of our consumer footprint … we’re in the game but we’re not at all a market leader in terms of what our digital capabilities are,” Chief Executive Charlie Scharf said on the company’s first-quarter 2021 earnings call Wednesday. “We have a very clear roadmap about what we intend to build out, and we will start bringing those things to the market this year.”
Wells Fargo Auto had $7 billion in originations in the first quarter of 2021, an increase of 32% from Q4 of 2020 and 8% year over year, largely due to “a strong market with supply shortages for both new and used cars,” Mike Santomassimo, chief financial officer, said on the call. Auto outstandings clocked in at $49.2 billion, a 1.3% YoY increase.
Wells Fargo is gradually loosening credit standards to pre-pandemic levels as economic forecasts improve, Santomassimo noted.
The rate of auto loans 30-plus days past due sat at 1.22%, a decrease of 55 basis points (bps) from last quarter and 109 bps YoY. The auto loan net charge-off rate came in at 0.44%, flat with last quarter and a decrease from 0.68% during the same reporting period last year.
Wells Fargo also decreased the allowance for credit losses (ACL) due to economic recovery. ACL for auto loans reached $1.1 billion, or 2.25% of total auto outstandings. Across Wells Fargo’s complete portfolio, ACL decreased to $18 billion, or 2.09% of total outstandings, from $12 billion a year ago, according to the Wells Fargo earnings presentation.
Meanwhile, consumers are shifting away from in-person branches, with 82% of consumer and small business deposits completed digitally in the first quarter, up from 76% a year ago, Santomassimo said. Wells Fargo has closed 395 branches since the first quarter of 2020, including 90 branches in the current quarter, with plans to consolidate another 250 branches this year, he noted.
Wells Fargo also previously announced it would invest in the bank’s origination system and credit decision tools in order to increase loan decision automation to more than 70% by 2022, from 59% in 2020.
The San Francisco-based bank announced in February the company will sell its asset management business — which managed $603 billion in the fourth quarter of 2020 — to private equity firms GTCR LLC and Reverence Capital Partners for $2.1 billion, according to a company release. Wells Fargo will own a 9.9% equity interest as part of the agreement, with the transaction expected to close in the second half of 2021.
Shares of Wells Fargo & Co [NYSE: WFC] were trading at $41.99 as of market close today, up 5.53% since market open. Wells Fargo has a market capitalization of $173.6 billion.
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