Auto loan originations hit a 10-year high in the second quarter, which means numerous banks and credit unions have been capturing business in this fast-growing sector.
Sageworks, a financial information company, analyzed banks of various sizes (those with more than $10 billion in total assets and those with less than $10 billion) to identify banking leaders in aggregate auto lending, which first topped $1 trillion in the second quarter.
With total auto loans outstanding of nearly $56 billion, Wells Fargo Bank NA led in auto lending among banks with more than $10 billion in total assets for the quarter ended June 30, according to FFIEC Call Report data via Sageworks Bank Information.
JPMorgan Chase Bank NA, Capital One NA and Bank of America NA followed on the list of the largest big-bank auto lenders. Ally Bank, which is the direct-banking platform of Ally Financial (formerly GMAC and a major dealer-finance company), rounded out the top 5.
Among banks with less than $10 billion in total assets, BMW Bank of North America, the lending arm of the popular luxury vehicle brand, took the top spot, with more than $7.1 billion in auto loans on its books as of second quarter. Ranking second was Atlanta-based regional bank Fidelity Bank, which dedicated nearly 42 percent of its total assets to auto lending.
Nationwide Bank, with the third-highest volume of auto loans, is the financial branch of the national insurance company. Commercial lender NBT Bank NA, with 160 branches across the Northeast region, ranked fourth, and the fifth-ranked bank was San Juan-based Oriental Bank, one of the largest financial institutions in Puerto Rico.
"It's good for the economy as a whole that auto lending volume is going up, and it looks like banks and credit unions are playing a role in that space," said Sageworks analyst James Noe. "Lending by banks is only a piece of the auto-financing pie, but it's good to look at these institutions specifically because we can see what's going on with the conventional means of getting financing."
According to credit bureau and financial information company Experian, banks had the largest share of the auto loan market as of the first quarter, with 34 percent market share, compared with 26 percent for so-called "captive" lenders (typically, manufacturer-backed finance companies) and 17 percent for credit unions. Finance companies and buy-here-pay-here car dealers made up the remaining 23 percent of the market. Banks' share of the auto loan market, however, was about 2 percent lower than a year earlier, pressured by a decline in the share of the used-car loan market, according to Experian.
Noe said that while the smaller banks represent about 98 percent of U.S. financial institutions, they only generate about 10% of U.S. auto lending. "It is beneficial to look at the lending landscape outside of the mega banks to get a full picture of auto lending in this country," he said. "It will be interesting to see if further trends will show more concentration of auto loans in smaller or larger banks."
The dollar-value of banks' auto loans that have become delinquent is relatively stable compared with recent years, even though auto-loan volume has increased, indicating a slight improvement in the banks' auto-loan credit quality, Noe said. Earlier this year, the OCC expressed concerns about the risks being taken in the auto-loan market.
"At this point, the delinquency metrics don't generate any signs of concern," Noe added.