While much of the auto finance industry has been focused on the damage done to Texas and Florida following successive hurricanes to the regions, Wells Fargo Dealer Services has also had to contend with the destruction in Puerto Rico, where the bank owns the largest auto financier on the island — Reliable Financial Services.
During the bank’s third-quarter earnings call earlier this month, Chief Financial Officer John Shrewsberry noted that it has been “especially challenging to determine the full impact from Hurricane Maria,” and that Reliable Financial Services is expecting increased charge-offs.
Although 85% of the island is still without electricity, employees at Reliable Financial Services are “safe” and Wells Fargo is sending emergency supplies, a spokeswoman told Auto Finance News.
“Our priority there is supporting team members on the island,” a spokeswoman told AFN. “On the business side, it is clearly a challenging situation and too early to determine the full impact. We can expect additional charge-offs and initial estimates were included in 3Q loan loss allowances.”
Although Wells Fargo did not provide updated numbers, Reliable Financial was the largest auto finance provider on the island with a $1.8 billion portfolio as of 1Q16, according to Caribbean Business.
Wells Fargo has been in charge of the Puerto Rican operation since the San Francisco-based bank bought Reliable’s former parent company Northwest Financial in 1998. However, in September 2016, reports emerged that Wells Fargo was looking to sell the operation.
Reports at the time indicated that Banco Santander Puerto Rico might be a possible buyer. However, that gave way to a possible joint venture between Popular Auto and FirstBank, that has yet to materialize, Caribbean Business previously reported.
The joint venture was explored because Popular Auto, which is the island’s leading lease provider, would hold a 45% marketshare if it acquired all of Reliable’s portfolio. The hypothetical deal would have allowed FirstBank to take on some of that marketshare, but a year later, nothing has materialized.
More than two weeks out from the devastation on the island, Manheim is still unable to reliably access the number of vehicles impacted on the island nor the replacement demand, Mark Schirmer, senior manager of public relations for Cox Automotive, told AFN.
