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Podcast: ‘Weekly Wrap’ on start of Q3 earnings

Chase Auto, PNC Financial and Wells Fargo kicked off third-quarter earnings season last week with mixed results, while consumer credit availability improved in September. 

Chase Auto grew its portfolio by 5.7% year over year during the quarter as originations increased 36% YoY. PNC and Wells Fargo both saw their auto portfolios decline, 0.7% and 8.4% respectively, compared with the same period last year.  

Delinquency rates at Chase Auto and Wells Fargo ticked up while PNC recorded an improvement in credit performance and lowered its allowance for credit losses.  

Meanwhile, consumer auto credit availability improved in September with captives loosening the most while approval rates improved and subprime market share inched up, according to Cox Automotive.  

In this episode of the “Weekly Wrap,” Deputy Editor Amanda Harris and Senior Associate Editor Riley Wolfbauer discuss the top stories for the week ended Oct. 13, and what to expect in the week ahead. 

Subscribe to “The Roadmap Podcast” on iTunes or Spotify, or download the episode. 

Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 29-31 at the Bellagio Las Vegas and features fireside chats with Vroom and Ford Credit. To learn more about the 2023 event and register, visit here. 

Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.   

Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter on automotive lending and leasing. It is Monday, October 16. And I’m Riley Wolfbauer joined by Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending October 13 2023. This episode is sponsored by AI software provider informed IQ. In automotive news shift technologies filed for Chapter 11 bankruptcy as part of a wind down of the automotive retailers business. The used vehicle retailers to California locations ceased operations as of October 6, shift will fund the closure of its operations using cash on hand along with cash generated due to the liquidation of its inventory. The decision follows months long, unsuccessful capital raising efforts and attempts to restructure the balance sheet chief executive Amen Musa said in a company statement during the third quarter new vehicle sales jumped year over year at nearly every major automaker amid a strong September and improving supply. American Honda General Motors Hyundai Nissan and Toyota Toyota North America each saw year over year gains and sales during q3. Honda tallied the greatest year over year increase of 52.7% year over year to just over 339,000 units. Stellantis, however recorded at 1% Dip year over year to about 380,000 units and staffing news ally financial chief executive Jeffrey Brown is stepping down in January after leading the company since 2015. Brown has served as CEO and a member of the ally board of directors for eight years and has been with the company for 14 years. He will leave the lender by January 31. To become president of Hendrick Automotive Group Ally has hired a global executive search form to aid in finding brown successor. Hendrick Automotive Group is an ally customer and as one of the largest privately held auto retail companies in the United States, employing nearly 11,000 people and with 131 retail franchises across 13 states and auto ABS the rate of 60 day delinquencies on subprime ABS deals has consistently risen since April, following an improvement at the beginning of the year due to the influx of tax refunds. In August the 60 day delinquency rate rose to 5.81%, an increase of 50 basis points month over month in 83 basis points year over year. According to data from Fitch Ratings. Fitch projects 60 Day delinquencies and subprime ABS will land around 6% by year end. For context, the highest 60 Plus day delinquency rate recorded across subprime ABS since 1994, was 5.96% in October 1996. According to historical data from Fitch, and Auto Finance News, Santander Consumer USA, and two preferred financing deals with OEMs eyeing us expansion this month, doubling the list of OEMs for which it serves as preferred financer skews or will not serve as the pervert as the preferred finance provider of loans and leases nationwide for any iOS, automotive and Lotus since 2013. scusa has been the private label provider first Atlantis is prime Chrysler capital business and Inc a preferred financing deal with Mitsubishi Motors North America in March 2022. In September, auto credit availability improved as approval rates increased and subprime share grew and lenders took on more negative equity share. The Dealertrack credit availability index inched up point 2% month over month but remained down 5.9% year over year at 97.1 in September, marking the fourth straight month of loosening credit access. Banks were the only lender type to tighten access during the month while captives credit unions and finance companies loosened on a sequential basis with captives loosening the most third quarter earnings season is upon us. And it started last week with Chase auto Wells Fargo and PNC Financial reporting on Friday. Amanda, will you give us the rundown?Amanda Harris 4:22
Yeah, so originations activities still mix so far, at least for the three banks that are reported so far this quarter, coming off the months of the slowdown in auto activity of banks due to a competitive rate environment, so not really that surprising that some will still be down. But Chase starting with Chase auto originations were up 36% year over year to 10 point 2 billion so the bank did take advantage of some of their competitors kind of pulling back in this space allowed him to kind of pick up some market share. Their allowance for our loans was flat with q1 and it was down slightly firmer curvature a year ago at point eight 7% in q3 as well. So some good things happening there. Wells Fargo autos originations fell 24% year over year to 4.1 billion amid credit tightening actions and a focus on returns rather than growth. And then at PNC, their auto outstandings declined 1.3% sequentially and point 7% year over year to about 15 billion, which is marked a sixth consecutive decline in lenders auto book. PNC is also reducing its staff and event to reduce expenses but the bank has not disclosed which lines of business are impacted. Credit performance so far this quarter is also pretty much in line with an expected deterioration. Chase autos 30 Day delinquencies did rise sequentially and year over year landing at 1.13%. late stage delinquencies and net charge offs also both went up year over year and court reporter Wells 30 Day delinquencies landed at 2.6%. slight uptick from q2 and up 41 basis points year over year. And it charges also went up sequentially and year over year, and the bank increases allowance for credit losses on a year over year basis. But does he a slight decline compared with the prior quarter. PNC however, decreased this allowance both on a sequential and year over year basis to a coverage ratio of 1.13% as auto loans 30 to 60 days past due we’re flat with q2 and down 80 basis points year over year 2.56%. net charge off ticked up just two basis points year over year 2.03%. So in those kind of number breakdowns, you can see there’s a little bit of mix there. Some banks faring a little bit better on delinquencies, but for for the most part, pretty much everyone and I expect this to kind of continue, everyone’s kind of seeing those early stage latencies go up late stage delinquencies go up and net charge offs go up. So it just kind of have to wait and see to what extent banks you know, see those those numbers kind of go up and credit forms deteriorate. Many of them play in the prime space to may not see rapid deterioration or to too much. But definitely going to see some as we know, inflationary pressures are still around student loan payments resumed. So I think he’s gonna we’re gonna see that across the board, not just banks, but we’ll keep an eye on that. And I expect we’ll see more mixed results for auto loan growth to you know, some banks have very much, you know, specific guidance on what they’re kind of focusing on as far as returns, some are growing but growing very, you know, specifically or strategically, some have pulled back and are continuing to kind of hold off growing the auto books too quickly. And we know, you know, banks offer securitizing their own books to we’ve seen, you know, multiple people come to kind of market for the first time or for the first time in a while. So all that’s going to play out, I think and what we’re gonna see the rest of earnings quarter, so we’ll keep a close eye on the trends as they get more, more reported and kind of see what plays out.

Riley Wolfbauer 7:42
Yeah, thanks, Amanda. We’ll continue our earnings coverage this week as we have Bank of America ally financial, US Bank, truest fifth, third, Huntington and Tesla all reporting this week. So that about does it for today’s episode. We are just two weeks away from the auto finance summit and power sports finance summit in Las Vegas. You can purchase your all access pass to attend both events October 29 through 31st. at the Bellagio in Las Vegas for 20% off, you can get your all access pass at WWW dot auto finance dot live. Thanks for joining us on the roadmap and be sure to follow us on acts formerly known as Twitter and LinkedIn. We will see you online at auto finance and here next time Podcast: ‘Weekly Wrap’ on start of Q3 earnings

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