Wells Fargo originated $8.3 billion of auto loans in the second quarter, up 2% from the same time a year ago, and up 8% from the previous quarter, the company announced today. Auto outstandings of $61.9 billion were up 7% from the same time a year prior and up 2% from the previous quarter.
The ratio of loans 30 days past due climbed to 2.54% from 2.31% year over year. Net charge-offs were 1% last quarter, up from 0.72% in the prior-year period, “predominantly reflecting loan growth and higher severity,” the company said in its earnings release.
“Any change in severity is really just a change in mix, the repo activity, the circumstances of what’s been coming in,” John Shrewsberry, senior executive vice president and chief financial officer, said during the company’s earnings call today. “I don’t think there is a systematic reason for it.”
The downward trend in consumer credit performance will continue as part of a more “normalized” environment, he added.
“I think that the expected case is a little bit lower ROA for most people that have been benefiting from the best of times in credit, but not so meaningfully that it causes us to want to curtail growth, based on the way we approach the market,” Shrewsberry said. “As I mentioned, we’re happy with our auto growth, we’ve maintained our pricing and our risk discipline.”
Though used-vehicle values continuing to climb – the June Manheim index of 126.2 was up 2% YoY – the bank expects those numbers to come down eventually, Shrewsberry said. “There’s an expectation that that [growth] can’t go on forever,” he said. “It’s part of why we would say that we expect future losses to be a little more normal in that business than what it’s been.”
Strong new-vehicle sales and growth in lease volume are expected to put pressure on the Manheim index as well, John Stumpf, chairman and chief executive, said during the call. “On the other hand, that’s really where we play and where we have a lot of market expertise,” he said. “So it’s a bit of an off set.”
