Increasingly, banks are finding good news in their auto loan portfolios, and they are talking them up. Whether that talk is merited is debatable.
Case in point is US Bancorp. During the bank’s earnings call yesterday, company officials said:
Our auto loans and lease portfolios were the exception in the retail category this quarter, with early-stage delinquencies improving linked quarter as the value of used cars continues to recover. Overall, these trends in our early-stage delinquencies further support our view that the pace of deterioration in credit quality is decelerating.
My concern is that some bankers are “selling” auto loan performance as a sign of the good banking times to come, and I am not convinced that the argument is true. There are, potentially, several reasons why autos are outperforming, say, mortgages, and some of those reasons are not necessarily related to macro credit trends. I won’t go so far as to say this “talk” should be stopped, but it certainly has its dangers. Or am I reading this situation the wrong way?
