Huntington Bank, of Columbus, Ohio, switched gears in the last year from expanding its footprint and adding new markets to cultivating more business with its existing dealer network.
The strategy seems to be working, as Huntington reported higher third-quarter auto loan originations with no deterioration in credit quality.
Originations were $1.5 billion, up 27 percent from the same quarter a year ago. At the same time, its average FICO score increased slightly to 767 from 762. Thirty-day delinquencies were flat vs. a year ago, at 0.72 percent. Huntington said its average buy rate is 20 to 50 basis points (one-fifth to one half of a percentage point) higher than competing prime-risk lenders, the same as a year ago.
Rich Porrello, director of auto lending, said Huntington offers prime-risk loans via 3,500 dealerships in 17 states. That’s up from around 2,000 dealerships in six Midwest states before the bank started expanding in 2010 with a move into eastern Pennsylvania and five New England states.
Porrello spoke about third-quarter results last week with Special Correspondent Jim Henry. The following are excerpts.
Q: Where is Huntington’s growth coming from? Is it still expanding geographically?
A: Our last big expansion really came in 2012. Since then, we expanded into Iowa and Connecticut (in 2013), so we haven’t done any further expanding. Our growth really is coming from further growth with our existing dealers.
Huntington isn’t everywhere, but it’s big in its core markets, right?
We continue to be No. 1 in Ohio; the biggest bank lender (in auto loans) in the state of Kentucky; and we continue to move up the ranks from a penetration standpoint.
How does Huntington get more business from the same dealers?
I think we’re getting paid for our strategy of staying in the business through the cycle and the expansion that we did in late 2010 and early 2011.
Has Huntington been able to increase pricing?
You’ve seen other lenders have backed off the business in the last quarter or so. I can’t tell you we’re sustaining a particular, significant price increase. Sure, we’re always looking at ways to be efficient -- efficient ways of increasing our business.
There’s a lot of talk lately about a supposed “rush” into subprime, but isn’t prime even more competitive, with thinner margins?
It’s competitive all the way around for the last 12 months through this part of the business cycle. It’s incredibly competitive, especially as leasing has grown and incentives grew.
Huntington is strictly prime and superprime, right? Does it do any leasing?
Our average FICO continues to be stable, at 767. We’ve stayed with the part of the business we feel most comfortable with.
We do not offer lease. We’re strictly focused on the loan business.
How many dealerships does Huntington have, and are they all franchised dealers?
About 3,500 dealers. It’s been pretty steady; we’ve been fairly steady. We’ve added a few dealers, but in the last 12 months, we really haven’t expanded our footprint at all.
We focus almost 100 percent of our attention on franchised dealers. The only independent dealer we have would be a franchised dealer that’s expanded and that has a separate, independent facility.
Does Huntington have incentives for dealerships? For example, Ally Financial offers the best deals to dealerships that get their ticket stamped in every area: retail, wholesale, F&I products, etc.
One thing we do a little differently is that both commercial, including floorplan, and indirect are part of the same management structure. Our nine regional offices offer commercial and indirect consumer lending through basically one channel. We provide acquisition lending, floorplan lending, and we also buy their indirect paper.
There is no special ticket stamp as you describe it. There really aren’t dealer rewards from an indirect standpoint. But like in any business, if you do floorplan, acquisition debt, etc., you can leverage that into your infrastructure.