As the asset-backed securities market continues to recover, as captives look to drive new car sales, and as several large-cap banks reduce pricing, investment bank Credit Suisse believes direct and indirect auto loan growth will slow for some regional banks.
In a recent installment of Barron’s Investor’s Soapbox, executives from Credit Suisse pointed out some of their predictions for the next 12 months and beyond:
- Credit risk will remain low for auto loans since current loan pricing is dilutive to bank net interest margins. Credit Suisse points out that M&T Bank and Valley National have already started to shrink their auto loan portfolios. Huntington is giving up marketshare in Ohio, but is maintaining consistent auto loan production through geographic expansion.
- Expected growth will come from the following banks: Capital One Financial, Wells Fargo, U.S. Bancorp, PNC Financial Services Group, Fifth Third Bancorp, TCF Financial, SunTrust Banks and Regions Financial, but TD Bank and Cap One will be the largest marketshare gainers.
- Regional bank auto loan portfolios will grow less than 8%.
- In the U.S. for 2012 and 2013, new-car sales will grow 10% to 15%, and the ABS market and captives will provide an increased role in financing car sales.
- Auto loan net charge-offs will remain very low for at least the next 12 months.
- Asset-liability management risk will also remain low given Credit Suisse’s interest rate forecast: The first fed rate hike will be in 2015.