Bank of America grew its auto portfolio by 6% year over year in the third quarter, despite rising charge-offs across the industry and an increasingly competitive prime marketplace.
Average auto loans and leases outstanding climbed to $52 billion in the quarter, compared with $49 billion during the same period the year prior, according to the bank’s earnings on Friday.
The lender remained a leader in prime credit quality during the quarter. Experian said Bank of America is the No. 1 originator of new loans to consumers with a Fico score of 740 or higher as of July, according to the report.
Because the bank doesn’t take on much risk in its auto portfolio, analysts have questioned whether the bank can continue to grow in an environment where lenders are fleeing subprime for prime and super-prime credit. Chief Executive Brian Moynihan said this quarter shows that the company can.
“The auto standards have always been high, we’ve always made that a business that we took very little credit risk in,” he said on the call. “The debate has always been, can you grow [with that low of credit risk]? And the answer is, yes. But you’ve got to grow in a rational, responsible basis, and that’s what’s playing out for us this quarter relative to other people.”
Charge-offs and delinquencies have been rising for nearly every auto lender in the space for the past few quarters, but Moynihan said he’s not concerned about the losses in Bank of America’s portfolio. While the lender does not break out specific auto losses, charge-offs were down overall across the bank’s various consumer credit categories, particularly in non-credit card categories.
Bank of America Dealer Financial Services launched it’s own direct lending portal at the start of 2017, which has likely contributed to the increased portfolio. However, it’s unclear how much volume the bank has originated through the service to date.
David Hollodick, senior vice president of consumer vehicle lending and product executive for the bank’s dealer financial services division, led the bank’s direct lending push and will discuss trends in direct lending at the 2017 Auto Finance Summit, which runs Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.