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Auto loans inch higher at US banks and thrifts in Q1

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Auto loans inch higher at US banks and thrifts in Q1

U.S. banks again grew their auto loan portfolios during the first quarter while the industry's auto delinquencies climbed year over year for the 16th consecutive quarter.

Auto loans for U.S. banks and thrifts increased a tepid 0.1% to $450.22 billion as of March 31 compared to the fourth quarter of 2017. Year over year, auto loans were up 2.3%. Auto delinquencies rose 26 basis points year over year to 2.10% but declined 48 basis points on a linked-quarter basis.

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Ally Financial Inc. remained the largest auto lender among U.S. banks and thrifts, with $61.85 billion in loans as of March 31, up $1.08 billion from the preceding quarter. Ally's auto loan delinquencies rose 27 basis points year over year to 3.75%, while auto charge-offs as a percentage of average auto loans fell five basis points to 1.59%.

During the company's first-quarter earnings call, CEO Jeffrey Brown was optimistic about credit quality in the company's auto portfolio. "I think the danger in looking at delinquencies is it's a point-in-time measure," he said. "But importantly, I think when we dive into the details, what we're not seeing is delinquencies falling to loss rates. We're just not seeing that trend. So we feel good overall about the state of credit."

Wells Fargo & Co. went from being the nation's largest auto lender with $60.43 billion in auto loans a year ago to the third-largest lender as of March 31, 2018, with $51.06 billion, as it worked to cut auto exposure and tighten underwriting standards. The company's delinquent auto loans were 3.08% of its total auto loans as of March 31, up 77 basis points from a year earlier.

The bank's strategy appears poised to change. CEO Tim Sloan said Wells Fargo has "pulled back enough and now [it will grow] that business again" during a recent interview with Bloomberg TV. During an investor day in May, management outlined future growth expectations for the auto business.

"After the decrease in 2017, we're seeing signs of that origination stabilizing," said Mary Tabb Mack, senior executive vice president of community banking and consumer lending. "We anticipate that they will start to grow in the second half of 2018 and we expect the overall portfolio to return to growth in the first half of 2019 as we complete the transformation and return to broad-spectrum lending and reduce risk."

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Nationwide, the average rate for a direct 60-month new car loan was 4.10% as of May 18, up 17 basis points year over year. Massachusetts was the only state where average auto loan rate declined year over year, dropping 3 basis points to 3.92%, while the average rate at Mississippi financial institutions remained the same at 4.23%.

Idaho's average rate jumped 54 basis points to 3.93%, the largest increase of any state. Vermont financial institutions offered the highest average rate for a direct 60-month new car loan, at 4.77%, while Washington, D.C., had the lowest average rate at 3.18%.

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Click here to access the data for the 25 largest auto lenders as of March 31, 2018.

S&P Global Market Intelligence compiles auto loan data based on call reports and Form Y-9s. Click here to see the aggregated data for commercial banks.

For a look at first-quarter loan growth at community banks, click here; for large banks, click here.