Capital One, Huntington target more prime loans

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Capital One continues to push aggressively in auto loans while other big banks, such as Chase and Wells Fargo, have slowed auto loan growth amid accelerating competition, especially in prime-risk lending.

Regional powerhouse Huntington Bank, based in Columbus, Ohio, is also pursuing much bigger volumes in prime auto loans. “We’re really excited about the auto business,” Rich Porrello, director of auto lending, told Automotive News in a phone interview last week.

Capital One Auto Finance had loan originations of $5.4 billion in the second quarter, an increase of 19 percent from the year-earlier period. At the end of the first half, Capital One’s total auto loans outstanding were $34.8 billion, also up 19 percent.

“We’ll continue to pursue growth opportunities in [credit] card, auto and commercial banking as growth remains a high priority,” said Richard Fairbank, CEO of the auto unit’s parent Capital One Financial Corp.

Experian Automotive data show Capital One was the No. 5 U.S. auto lender for new- and used-vehicle loans combined in the first quarter of 2014 -- the latest period for which detailed statistics were publicly available. Wells Fargo Dealer Services was No. 1, followed by Chase Auto Finance, Ally Financial and Toyota Financial Services at No. 4.

Top-ranked Wells Fargo reported an increase of just under 10 percent in auto originations in the second quarter; Chase Auto was up 4 percent. Ally will report its second quarter results on July 29.

Capital One is historically stronger in used cars than in new vehicles, but over the past few years the bank has increased its mix of new cars and loans to customers with higher credit scores.

CEO Fairbank said in a conference call for analysts and investors last week that Capital One aims to increase its share of business with its existing dealers. Since it is historically strong in used cars, logically a share increase with the same dealerships implies a greater mix of prime-risk loans, he said.

“In our dealers where we have a very strong position in subprime, we have a lot of opportunity to grow in prime,” he said. Fairbank said the bank is keeping a “cautious eye” on pricing in the prime segment, where risks are lower but margins are thinner.

Bigger footprint

At Huntington Bank, where second-quarter originations rose more than 30 percent, posting a big percentage increase in volume is easier because the bank is smaller to begin with, Porrello said.

Huntington also has greatly expanded its geographical footprint, growing from a six-state Midwest business in 2010 to a 17-state business from the mid-South to New England. Its latest market additions were Connecticut and Iowa last year, Porrello said.

For the second quarter, Huntington’s auto loan originations were up 35 percent from a year ago, to $1.5 billion. The bank said it has more than 3,500 dealerships signed up.

As it added territory, Huntington stuck with a superprime lending strategy. Its average consumer credit score for auto loans was 765 in the second quarter, up from 759 a year earlier. At the same time, its new-vehicle mix increased to 50 percent from 44 percent a year ago.

While Huntington’s average consumer credit score has improved, the overall industry average has declined as most lenders made approvals easier. The average customer credit score for a new-vehicle score was 714 in the first quarter, down from 722 a year earlier, according to Experian Automotive.

Huntington CFO Mac McCullough said in a conference call last week, “We did not sacrifice credit quality to achieve this volume growth.”

You can reach Jim Henry at autonews@crain.com.

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