Ally’s Originations Drop While Delinquencies Rise

Ally Financial Inc.’s auto origination volume dropped 11.8% in the fourth quarter compared to the same period last year amidst rising delinquencies and charge-offs, the company disclosed in its earnings report today.

The bank originated $8.2 billion in auto loans and leases in 4Q16 down from $9.3 billion the year prior. For the full year, originations were down 12.1% to $36 billion compared to $41 billion in 2015.

Retail auto delinquencies rose 14.5% — to 3.28% of the company’s total auto portfolio. Similarly, retail net charge-offs followed suite with a 0.35 basis point gain to 1.56% of the portfolio.

“I do expect charge offs to go up again in 2017, it’s a bit of what I’d call the continued seasoning of the book, particularly as you get 2015 vintages starting to hit their peak loss period,” Chris Halmy, chief financial officer for Ally, said during the earnings call. “I do not expect it to go up to the same magnitude as we saw from ‘15 to ‘16 — that 29 basis points. I do expect it to rise however in the first half of the year, and you’ll see more leveling off in the back end.”

Ally’s credit quality mix dropped slightly in superprime and grew in prime. Superprime originations as a percentage of the total portfolio dropped to 23.8% for the full year 2016, from 25.6% in 2015. Meanwhile, the company’s prime mix grew to 36.1% in 2016 from 34.4% the year prior.

Some of that shift could be due to “regional players” backing away on the high end of the credit spectrum, large lending competitors raising their rates, and credit unions sticking to lower rungs of the credit spectrum — which may not last, Halmy said.

“It’s still a competitive market, and on the prime to superprime side, the credit unions continue to keep pricing low and they’ve picked up a bit of marketshare,” he said on the call. “They tend to be a bit of a lagger when it comes to raising prices so I think they are worth watching on the top side.”  

Ally’s leasing and share of General Motors financing deals continues to decline as the manufacturer continually directs consumers to its own captive arm, General Motors Financial.

Ally’s GM originations fell 21.6% on the year to $7.6 billion in 2016 compared to $9.7 billion last year. That drop was reflected in Ally’s leasing mix which dropped to 8% of its overall portfolio compared to 11% the year prior.