The first quarter was slow for Consumer Portfolio Services, and for the auto finance industry as a whole, because the tax return boost — which has historically propelled the quarter — has become “scattered,” Charles Bradley, chief executive of CPS said during its earnings call yesterday.
The auto lender experienced a 26.5% year-over-year decline, to $229 million contracts in the first quarter, according to the earnings report.
“Overall we’re pleased, [though] not excited about how the quarter went,” Bradley said on the call. “Everybody is very used to having the first quarter of the year be a very big quarter — tax returns and such — and lately in the last few years that’s changed. The days of the first quarter being the hallmark for the year are probably over.”
The tax return boost may still come in the second quarter but it will have an evening-out effect, he added.
Still, CPS’ portfolio grew overall. Outstandings stood at $2.32 billion for the quarter, up from $2.14 billion during the same period the year prior.
Delinquencies, including repossession inventory, rose to 9.74% of CPS’ portfolio up from 8.97% in the first quarter of 2016. Annualized net charge-offs also rose to 7.91% of average loans in the portfolio, up from 7.57%, the year prior.
“Losses are higher, but we think we’re hopefully at a point where maybe they’ve peaked and we could — as collection does continue to improve — that we have sort of reached the high end of that scale and we’ll start working our way back down,” he said.
However, Bradley later clarified that he doesn’t believe recovery rates are going to get better any time soon, rather the company’s collections and overall strength of the loans will improve.
“We don’t think recoveries are going to improve, so that’s not in the solution to the equation either,” Bradley said. “We’re finally getting some progress in just the overall way we collect our loans, and so that’s why I’m optimistic that maybe these things are finally peaked.”
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