Wells Fargo and JPMorgan Chase, two of the biggest banks in auto finance, adopted opposite lending strategies in the first quarter, their latest financial results show.
At Wells Fargo Dealer Services, total originations of auto loans and leases were lower compared with the year-earlier period, for the second quarter in a row and by a larger margin.
Chase Auto Finance reported its 14th consecutive quarter of year-over-year increases in originations.
Both banks reported first-quarter results on Tuesday.
Wells Fargo CFO John Shrewsberry said the bank’s decline in auto originations reflects its “continued risk and pricing discipline in a competitive market.”
During the company’s conference call, he pointed out that the bank’s outstanding auto loans and leases in the first quarter were up 7 percent from the 2014 period, to $53.3 billion.
Auto originations, though, fell 10 percent in the first quarter to $7.1 billion, from $7.8 billion in the first quarter of 2014. In that quarter, Wells Fargo’s originations were at an all-time high, which the bank tied in the second quarter of 2014. In the fourth quarter last year, auto originations were $6.7 billion, down just 1 percent from fourth quarter of 2013.
Wells Fargo spokeswoman Natalie Brown said the company is managing its overall risk portfolio “while still providing consistent access across the credit spectrum.” That includes subprime lending, which, she said, has remained “generally stable at around 10 percent for more than a decade.”
U.S. light-vehicles sales, fueled by low interest rates, pent-up demand and steady job gains, are forecast to climb to 17 million this year from 16.5 million in 2014. The steady rebound in industry sales has been a boon to lenders.
JPMorgan Chase & Co. reported Chase Auto Finance generated $7.3 billion in loans and leases in the first quarter, an increase of 9 percent from the year-earlier period. Total outstanding loans and leases were $55.5 billion, up 5 percent from a year ago.
CFO Marianne Lake said during her company’s conference call that the bank had “solid loan and lease growth partly offset by spread compression.”
That is, JPMorgan Chase made more auto loans but had thinner margins overall -- the strategy Wells Fargo wants to avoid.