US banks' auto loan delinquency ratio reaches highest point in over a decade

US banks' auto loan delinquency ratio rose again in the third quarter, reaching the highest level in over a decade.

The auto loan delinquency ratio stood at 2.95% in the third quarter, up 20 basis points from the second quarter and 56 basis points from a year ago. The third-quarter level marks the highest auto loan delinquency ratio for the industry since at least 2012, before which complete data is not available, according to S&P Global Market Intelligence data. It was also the seventh consecutive year-over-year increase.

The uptick came even as US banks continue to decrease their exposure to the sector, with the industry's collective auto loans falling slightly to $538.90 billion at Sept. 30 from $541.50 billion at June 30. Total auto loans were $11.62 billion lower than the year-ago quarter.

The industry has posted six consecutive quarters of year-over-year declines in auto loans.

Ally nears auto loan parity with Capital One

Among the top 25 auto lenders, 12 posted a sequential increase in their portfolios, while 13 recorded quarter-over-quarter decreases in the third quarter.

Ally Financial Inc. continued to move in on the bank with the most auto loans, Capital One Financial Corp. Ally increased its total auto loans by 1.4% sequentially as Capital One's declined by 0.5%, putting the company within striking distance of overtaking Capital One as the top auto lender.

Auto loan originations declined 10% year over year at Capital One as the company trimmed in preparation for a decline in credit quality, Chairman, President and CEO Richard Fairbank said during the company's third-quarter earnings presentation.

"Just as we did in the card business, probably actually more proactively and more significantly, in auto we trimmed back around the edges in anticipation of certain worsening," Fairbank said.

Associated Banc-Corp reported the largest sequential increase in auto loans among the top 25 at 12.9% for total auto loans of $2.01 billion at the end of the third quarter. Citizens Financial Group Inc. reported the largest quarter-over-quarter decline in auto loans among the top 25 with a 10.8% decrease.

– Access an industry document detailing auto loan holdings. – View US industry data for commercial banks, savings banks and savings and loan associations.

With an auto loan delinquency ratio of 11.70%, Boston-based Santander Holdings USA Inc. had the highest ratio among the top 25 banks by auto loans. The company's ratio increased 120 basis points from Sept. 30, 2022.

OFG Bancorp again took second place with a 7.11% delinquency ratio after a 4-basis-point decline from the year-ago period. Capital One also retained its status from the previous quarter with the third-highest delinquency ratio at 6.48%.