US banks' Q1 auto loans show steady sequential growth

U.S. banks' collective auto loan portfolio grew at a modest pace in the first quarter despite the automotive industry facing significant supply chain challenges.

The banking industry's auto loan portfolio rose at a steady pace of 1.4% to $545.12 billion in the first quarter on a sequential basis, according to an analysis by S&P Global Market Intelligence.

On a year-over-year basis, the portfolio grew 9.2%. However, industry executives have highlighted that looming supply chain issues continue to weigh on the auto industry.

"Excluding mortgage, consumer and card balances decreased 2%, driven primarily by a 3% decline in auto that was attributable to ongoing supply chain issues and a highly competitive environment," said William Rogers, executive chairman, CEO and president of Truist Financial Corp., during the first-quarter earnings call.

Performance in competitive environment

The majority of the top 25 banks and thrifts continued to experience quarter-over-quarter growth, though eight saw declines.

Capital One Financial Corp., which maintained its spot as the top auto lender, remains optimistic about the possibility of growth in the portfolio even as competition remains intense.

The company posted a 3.7% quarter-over-quarter increase in its auto loan portfolio, reaching $78.60 billion.

During the first-quarter earnings call, Capital One founder, Chairman, CEO and President Richard Fairbank noted that credit unions that saw a rise in deposits during the pandemic are gaining a significant share in the auto loan segment — similar to previous credit tightening cycles.

"The competition in the auto business continues to remain intense," Fairbank said. "It's showing up across the board from credit unions, big banks and small independent lenders."

Credit unions experienced an increase in used vehicle loans and new vehicle loans during the first quarter as the industry posted its highest quarterly loan growth in a decade.

Among the top 25 auto lenders, Old National Bancorp posted both the highest quarter-over-quarter and year-over-year growth in its auto loans. The Evansville, Ind.-based company also completed its merger of equals with First Midwest Bancorp Inc. during the quarter.

Old National Bancorp's auto loan portfolio surged by 94.4% sequentially to $1.69 billion and was up 90.5% year over year.

Delinquency shows signs of normalization

The delinquency ratio in the collective auto loan portfolio was 1.92% during the quarter, down from over 2% in the previous quarter.

Santander Holdings USA Inc. continued to have the highest delinquency ratio among the top 25 auto lenders at 8.35%, down from 9.43% in the previous quarter.

On the right path

Capital One's Fairbank said the company is optimistic about its auto lending business but must closely watch pricing given that the auto marketplace has not yet responded on pricing relative to what is happening to interest rates.

"But I think that we are really excited about our opportunity in the auto business," he said. "The technology products that we have out there are really cutting edge and getting a huge amount of traction.

"Our eye is just very careful on the pricing out there and also just whether there is an overexuberance relative to the number of planets that aligned in the auto lending business," Fairbanks said.

Access an industry document detailing auto loan holdings.