Rich Porrello is embarking on his first year as president of auto finance at Huntington National Bank, after assuming the role in December.
His 2018 to-do list includes driving more business to dealerships and leveraging Huntington's local business model. The bank works in 23 states but uses local underwriters that grasp the market and the dealership model.
Porrello, a nearly 30-year Huntington veteran, has been running the company's day-to-day auto business since 2010. His new role adds the responsibility of managing the auto business's funding and servicing group, which books all indirect auto loans into Huntington's system and funds dealers accordingly. Funding dealers quickly is a top priority and key to the company's value proposition of being dealer-centric, says Porrello, 53.
He spoke with Staff Reporter Hannah Lutz last month about his plans for the business.
Q: What are your goals for your first year as president of auto finance?
A: This has been a business that Huntington has been in since the 1950s. We want to continue to stay focused on growing the business, growing our relationships and allowing dealers to sell more cars.
We are very focused on driving more business to the 4,500 dealers we service on the indirect side and staying focused on driving more commercial-growth auto finance business through our channel. We operate a really local model in our regions, and we want to continue to leverage that to help dealers sell more cars.Are there plans to expand business to other states?
We went on a geographic expansion in 2010. Coming out of the negative trends in the industry, our business performed really well. We saw it as an opportunity to grow, so we expanded geographically in 2010, 2011 and 2012. And then we expanded geographically with the acquisition of FirstMerit Bank in 2016. It grew our banking presence in the states of Illinois and Wisconsin. We were already in those states for indirect auto. [The acquisition] allowed us to grow our commercial business in those markets. It further drove our value proposition of being local in more markets. At this point in time, we continue to now focus on training the markets that we expanded to, not to say that someday we won't expand in the future.
Why is leveraging local models so important to Huntington?
It's all about knowing our dealer customers. You have to know the business, what's happening in the marketplace. It's very important for us to have local underwriters ... that understand the markets and understand how dealers manage their businesses and how we can be dealer-centric in our decisioning. So it's important that we have boots on the ground where dealers are selling cars and consumers are buying them.
Huntington's auto loan balance in the fourth quarter increased to $12.1 billion from $11 billion a year earlier. What gives the bank confidence to expand auto loans while its peers are scaling back?
We've been committed to the business for so long, and we've been consistent with our results, consistent with the loans that we approve and the model that we use [with] those dealers. If you look at our average FICO over time, look at our average losses over time, they've been consistent, and it's allowed us to stay in the business for over 60 years. I'm very confident that consistency resonates with dealers.
Huntington's average FICO score for auto loan borrowers is 772, so most of the bank's auto loans go to prime borrowers. Will the bank adjust its credit standards?
We want to continue to get dealers answers really, really quickly. We want to fund our business when it gets in. From our buy-box standpoint, we want to remain consistent. We want that average FICO to stay about where it's at because we think that by staying there, we can continue to get answers to dealers really fast. Over 75 percent of our answers get back to a dealer in less than three seconds. And oftentimes, it gives the dealer multiple options of how to finance that same customer. When he or she is in the finance office and the structure of that deal changes, they can just look at our approval and say, 'Yep, I can do it in this range,' which is a differentiator for us. By staying consistent with that buy box, we get to do things that differentiate ourselves.
The bank's new- and used-vehicle mix tilted slightly more toward new vehicles in the fourth quarter. Do you expect that to change as used-vehicle sales rise?
We are comfortable with both new and used financing. That will change based on the market. Every quarter it changes. Typically, December is very heavy for us on the new side. Some forecasters are saying that new-vehicle sales may be down, while used are projected to be up. We're comfortable with that. We recognize the importance of used cars and new cars in the business. That changing a few points up or down doesn't concern us.
What are the biggest auto finance trends you foresee this year?
We have been looking at [financial technology] changing our business for quite some time, and we haven't yet seen the dealer model change dramatically. We are watching that closely to make sure that when it changes, we are ready for it. But overall in 2017, and what I believe will happen in 2018, the main providers in this business continue to be very realistic. It's a robust operating environment but realistic. Credit quality trends continue to remain fairly stable. The market is still strong, and I believe that those, like Huntington, that remain consistent in what we have set out to do, which is help dealers sell cars, will continue to be successful.
How will Huntington adjust auto loan interest rates as the U.S. Federal Reserve rate continues to rise?
[Auto] is a big business for Huntington. We continue to manage margins closely, as a good lender would, for our shareholders. You have to manage it, though, with the thought of what your competitors are doing because you don't want to get adversely selected. We need to continue to be relevant to our dealers. We look at it very closely with what's happening with cost of funds. But at the same time, we look at what's happening in the industry with our competitors because we have to manage interest rates from the standpoint of protecting our margins [and] our credit quality.