BMO exits indirect auto lending

BMO Financial Group exited indirect auto lending Friday as the bank looks to prioritize its resources following layoffs in recent months. “By winding down the indirect retail auto finance business, we have the ability to focus our resources on areas where we believe our competitive positioning is strongest,” Jeff Roman , director of communications at BMO, told Auto Finance News in a statement. “We have a deep and long-standing commitment to support our customers, and this will continue as we help customers with their financing options.” The bank sent notice Friday to dealers, according to a letter shared on social media and verified by BMO. BMO will fund all contracts approved before Friday, with approvals valid for up to 90 days and payoff processes remaining the same, according to the letter. BMO will continue to provide auto loans directly to consumers as well as commercial auto lending such as floorplan financing for dealers, people familiar with the matter told AFN . The move follows hundreds of job cuts at the Canada-based Bank of Montreal in August. The bank, which offered auto loans in the United States and Canada, has a large presence in California following its purchase of San Francisco-based Bank of the West for $13.8 billion in February, according to BMO’s third-quarter report to shareholders. “We are working closely with affected employees to provide support and to ensure they are treated with fairness and respect,” Roman said. BMO’s exit from indirect auto lending follows an uptick in credit loss provisions during the most recent quarter. As of Q3 ended July 31, BMO’s provision for credit losses rose to C$492 million ($364.5 million) compared with $100.8 million a year prior, according to the letter to shareholders. The bank had expected loan demand in the U.S. to “remain muted through the end of the year,” Tayfun Tuzun , chief financial officer, said on BMO’s Aug. 29 Q3 earnings call. BMO Financial’s total consumer installment and other personal loan portfolio, which includes auto and powersports loans , clocked in at $76.8 billion as of July 31, according to the letter. The portfolio decreased less than 1% sequentially and 20.3% compared with the period ending Oct. 31, 2022. Chicago-based BMO Harris , Bank of Montreal’s U.S. subsidiary, had $5 billion in auto outstandings as of yearend 2022, according to the Big Wheels Auto Finance Data 2023 report. BMO is the latest in a series of banks that have shifted away from auto finance to focus on more profitable businesses. Citizens Bank and Mechanics Bank exited indirect auto lending earlier this year. Capital One , Fifth Third and PNC Financial also scaled back their indirect auto lending businesses this past year. Shares of BMO [ NYSE:BMO ] were trading at $88.47 at 1:39 p.m. EST today, down 0.6% from market open. BMO has a market capitalization of $63.8 billion. Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 29-31 at the Bellagio Las Vegas and features fireside chats with Vroom and Ford Credit. To learn more about the 2023 event and register, visit here .

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