Auto loan delinquencies surpass pre-pandemic levels

Auto loan delinquencies at U.S. banks rose for the third straight period in the fourth quarter of 2022 and surpassed the pre-pandemic levels reported in the fourth quarter of 2019.

The total auto loan delinquency ratio increased 49 basis points sequentially to 2.88% in the fourth quarter of 2022, according to S&P Global Market Intelligence data. The ratio was at 2.86% in the fourth quarter of 2019.

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Capital One Financial Corp.'s auto loan delinquency ratio jumped 161 basis points year over year to 6.38% in the fourth quarter of 2022.

Boston-based Santander Holdings USA Inc. again had the highest delinquency ratio among the top 25 banks by auto loans, up 244 basis points from the prior year to 11.87%.

Puerto Rico-based OFG Bancorp had the second-highest delinquency ratio in the quarter at 6.81%, up 58 basis points year over year.

Slight decline in auto loans

U.S. banks' collective auto loans shrank slightly in the 2022 fourth quarter to $548.39 billion, from $550.52 billion in the third quarter. It was the first total auto loan decline since the second quarter of 2020 but still represented year-over-year growth of 2%.

Capital One is still king

Among the top 25 auto loan lenders, 11 posted a sequential increase in their portfolios while 14 recorded a quarter-over-quarter increase.

Capital One's auto loans fell slightly with a 1.5% sequential decline to $78.37 billion. Still, the bank had the largest auto loan portfolio in the country during the 2022 fourth quarter.

Heightened normalization in subprime auto loans and pricing pressure from dealers and rising rates drove Capital One's slight downscaling of its auto loans, President and CEO Richard Fairbank said during a quarterly earnings call.

"We didn't just totally pull back, but around the edges, these sort of lowest resilient, lowest margin stuff we pulled back on," Fairbank said.

Dewitt, N.Y.-based Community Bank System Inc. reported the steepest sequential rise in auto loans at 6.5% to $1.42 billion in the fourth quarter of 2022. Meanwhile, Minneapolis-based U.S. Bancorp reported a steep 22.8% decline in auto loans, the most significant quarter-over-quarter drop among the top 25 auto lenders.

Survey says

About 21.4% of bankers who responded to an S&P Global Market Intelligence 2023 U.S. Bank Outlook Survey said they expect personal auto loans to decrease in value within the next year.

Additionally, 33.3% of respondents said they expect personal auto loans to have lower credit quality within the next 12 months, the highest percentage among the five loan types included in the survey.