GM Financial Q3 earnings drop 16%

Editor's note: An earlier version of this story contained an incorrect figure for Q3 earnings before interest and taxes (EBIT). The correct figure is $911 million, down 17 percent from 1.1 billion a year earlier.

Lower leased-vehicle income dragged down GM Financial's third-quarter earnings as net income fell 16 percent and revenue dropped 5 percent, the company reported Tuesday.

Net income was $688 million for the quarter compared with $829 million last quarter and $822 million vs. the same period last year. Net income for the first nine months was $2.5 billion compared with $2.9 billion last year for GM's captive finance arm. The automaker also reported its earnings Tuesday, registering record revenue for the quarter.

Total revenue in the third quarter was $3.19 billion compared with $3.35 billion for the same period last year.
 

The $200 million decrease in adjusted earnings to $900 million for the quarter is "primarily due to lower net leased-vehicle income," GM CFO Paul Jacobson said.

Retail loan originations, however, increased to $9.4 billion, up 21 percent from $7.8 billion for the same period a year ago. Lease originations remained relatively flat — a promising development for the lender after they plunged in the second quarter due to low new-vehicle supply, leading to fewer incentives to lease vehicles.

Net charge-offs for the quarter jumped 37.2 percent to $118 million, up from $74 million, though Jacobson noted they remain below pre-pandemic levels as GM Financial's credit mix has shifted toward prime customers.

"Our whole portfolio now is 72 percent prime," said Dan Berce, president and CEO of GM Financial. "It's also heavily new-car finance-related, which typically has been a stronger credit profile."

Berce said GMF's new-car portfolio continues to perform substantially better than pre-pandemic levels.

"Our used-car, non-prime book is showing more normalization," he told investors on the earnings call. "We always look for targeted ways to improve our underwriting ... so that would be the area of most focus — the used-car, non-prime book. We overall expect some normalization in credit, especially with weaker economic conditions, but our reserve levels already contemplate that."

In the first quarter, Berce discussed how used-vehicle values might impact the captive's earnings.

Other results from GM Financial's third-quarter earnings report Tuesday include:

• Revenue: $3.19 billion, down 5% from a year earlier.
• Net income: $688 million, down 16% from a year earlier.
• Earnings before interest and taxes: $911 million, down 17% from $1.1 billion a year earlier.