GM Financial said on Tuesday that elevated interest rates hurt its second-quarter earnings, which were down 31 percent year over year, despite an uptick in loans and lease originations.
The captive on Tuesday posted second-quarter earnings of $571 million, down from $829 million in the same quarter of 2022. Earnings before taxes for the quarter were $766 million, down from $1.1 billion the same time last year.
"GM Financial delivered EBT adjusted of over $750 million, down close to $350 million year over year, in line with expectations and primarily due to a higher cost of funds and lower net lease vehicle income, partially offset by increased finance charge income from portfolio growth and a higher effective yield," said CFO Paul Jacobson in the automaker's second-quarter earnings call with investors.
The lender said in its fourth-quarter and year-end earnings call in January it expected earnings to normalize in 2023 after strong credit performance and historically high used-vehicle prices boosted results during the last two years.
GM Financial originated $9.1 billion in retail loans in the second quarter, up from $9 billion the same quarter a year ago. The captive's second-quarter lease originations totaled $4.6 billion, up from $3.9 billion in the same period last year. Lease originations in the U.S., its main market, were up because of improved GM retail sales, increased lease sales mix and a higher average amount financed, the captive said.
"GM Financial's key metrics, balance sheet and liquidity remained strong, providing them the ability to support the GM enterprise and our customers across economic cycles," Jacobson said. "As a result, we are taking our full-year EBT adjusted guidance up to the $2.5 to $3 billion range."
Jacobson's previous guidance for 2022 EBT adjusted was in the mid-$2 billion range.
GM Financial paid a $450 million dividend to GM in June.
Other Q2 earnings highlights:
• Total revenue rose 1 percent in the second quarter to $3.5 billion from $3.1 billion.
• Loans 31 to 60 days late remained unchanged at 1.8 percent of the portfolio. Accounts more than 60 days delinquent were 0.6 percent of the portfolio, unchanged from last year.
