Four auto lenders exited the sector this year, pressured by tough market conditions and faltering profits. Three of the four had billion-dollar portfolios, opening the door for some shuffling among top industry players.
While some lenders quit indirect auto lending — opting to keep originating direct loans — others shut their doors completely.
At the beginning of the year, Regions Bank shuttered its indirect auto lending business, choosing instead to focus on direct loans. The Birmingham, Ala.-based bank informed its dealer network in January of the impending exit and continued to fund loans through April 1. Regions Bank’s portfolio has been declining since 2016, closing out last year with $3.1 billion of loans outstanding.
In May, Fidelity Bank exited indirect auto lending after nearly 30 years in the business. Fidelity Bank had been steadily retreating from the auto finance space, withdrawing from 10 states starting in late 2017. “Throughout 2018, we have focused on executing our business strategy to rebalance our loan portfolio with higher-yielding commercial credits and deemphasize indirect auto lending, which is dependent on our growth,” the company stated in a 10-K filing with the Securities and Exchange Commission. The Atlanta-based bank had a $1.6 billion auto loan portfolio at yearend 2018, down from $1.7 billion in the prior year, according to Big Wheels Auto Finance Data.
In August, subprime lender Security National Automotive Acceptance Co. stopped purchasing auto contracts and liquidated its portfolio after three decades in operation. “The risk-adjusted returns in today’s market do not meet the thresholds SNAAC had set to ensure profitable and sustained growth which led us to this decision,” the lender told AFN in an email. A few months later, SNAAC transitioned its portfolio to Westlake Financial’s servicing subsidiary, Westlake Portfolio Management.
Bank of the West
San Francisco-based Bank of the West closed down its indirect auto lending business in November and subsequently laid off its East Coast sales staff. The bank shuttered its indirect auto lending business to focus on its marine and RV business. Bank of the West’s auto portfolio had been slipping the past two years. Outstandings dropped 6.7% to $4.1 billion at yearend 2018, on the heels of a 19% decline in 2017, according to Big Wheels Auto Finance Data. Bank of the West was ranked 37th in the Big Wheels ranking of the nation’s top 100 financiers.
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