Capital One Auto Finance Grows Portfolio, Identifies Risks Ahead

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Capital One grew its auto portfolio in the second quarter while lowering charge-offs but still anticipates headwinds moving forward as competition ramps up, the company reported in earnings Thursday.  

Charge-offs were down 22% to $1.32 million, which allowed the bank to take back $77 million it had set aside for loss allowances.

“Recall that the second-quarter charge-off rate last year was elevated by changes in how we recognize bankruptcy-related charge-offs,” Chief Executive Richard Fairbank said on the earnings call. “Adjusting for these impacts, the auto charge-off rate still improved modestly year-over-year in the second quarter.”

The company’s auto outstandings grew 7.8% year over year to $55.8 billion on the quarter. Capital One managed that growth despite a $459 million dip in originations year over year to $7 billion originated.

Still, Fairbank noted during the earnings call that competition in the auto finance space is increasing, and he expects those charge-offs will start to “gradually” increase again “as the cycle plays out.”   

He noted that trade concerns and increasing tariffs could expose some auto lenders to more risk, but Capital One is not in that mix.

“Certainly relative to a number of auto lenders, our mix is more toward the used side because we do not have a big partnership with a captive auto finance [company], which for some of the banks out there can lead to very significant volumes of new loans,” he said. “So, with respect to [trade], we probably have less exposure than some others might.”

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As Assistant Editor at Auto Finance News, William specializing in compliance, operations, and subprime. As a Brooklyn implant by way of Ohio, he's happy to discuss the triumphs and pitfalls of Cleveland sports as well as the latest music trends. Former bylines include Candy & Snack Today, Inverse, and The Tennessean.

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