National City Corp. is getting out of the indirect vehicle lending business. The bank says volume and profits were too low.
Indirect lending consists of retail loans that financial institutions make to consumers through dealers.
National City, of Cleveland, says it will continue to work with dealers on vehicle inventory financing, cash management programs and real estate mortgages. The bank also makes vehicle loans directly to consumers.
National City does business in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio and Pennsylvania.
"The decision to end indirect auto originations was difficult, as we have participated in the segment for many years," National City Vice Chairman Peter Raskin said in a statement. The bank declined to elaborate.
Because of the change, National City incurred about $40 million of charges in the fourth quarter of 2005.
National City's volume of indirect auto lending declined over the past two years, according to a report from J.P. Morgan Securities Inc. The bank had a "difficult time" in the business line, Morgan says.
The report notes that National City's $2.65 billion portfolio of indirect auto loans was just 2.4 percent of the bank's total loans. Morgan predicted the bank's loss of earnings because of its exit from indirect lending will be insignificant.
You may e-mail Donna Harris at [email protected]