GM Financial Profits, Originations Grow in 3Q

General Motors Financial boasted increased profits, higher loan originations, and improved credit quality in the third quarter, according to yesterday’s earnings.

Net income for the quarter shot up 118% to $441 million, as the captive notched its fifth straight quarter of higher credit scores underlying finance volume.

“We financed 43% of GM new vehicles sales with a Fico score greater than 620, and we financed 42% of loans with a Fico score of less than 620, marking the first quarter where our loan origination share of prime was greater than subprime,” GMF CEO Dan Berce said on an earnings call with investors.

The overall weighted average Fico score for the quarter was 736, up from 696 in the year-prior period. “The composition of our ending earning assets continues to shift to more prime credit quality,” said Susan Sheffield, EVP and chief financial officer, adding that the subprime loan portfolio represented 11% of end of earnings assets, down from 13% YoY.

Meanwhile, GMF’s third-quarter loan originations jumped 42% to $6.7 billion, while lease originations fell 17% to $5.4 billion. “U.S. disposition proceeds on leased vehicles returned were favorable compared to estimates at origination due to a stable used-vehicle pricing environment,” the earnings presentation stated.

Total originations were up 8% YoY, compared with a 6.5% gain in the prior-year period.

Total delinquencies in the quarter dropped to 4.7% from 5.2% YOY, and net chargeoffs fell to 1.7% from 1.9%.

Despite the 3Q improvement, GM Financial expects an earnings decline next quarter. “As we look toward Q4, we expect it to be down sequentially from Q3 from an EBT (earnings before taxes) standpoint, due to seasonal weakness,” Sheffield said.

Looking ahead to 2019, vehicle prices will likely decline, Berce said. “For all of 2019, we expect vehicle pricing to be down roughly 4% to 5%, primarily because the off-lease supply of used vehicles will not peak until mid-2019, both industrywide and for GM, specifically,” he said.

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