Indirect auto loans again propped up Fifth Third Bank’s total consumer portfolio, offsetting declines in mortgage and home equity balances.
The bank logged an 18% year-over-year increase in indirect secured consumer loans, comprised of primarily indirect auto loans, according to last week’s earnings supplement. Indirect secured consumer outstandings clocked in at $13.7 billion in the fourth quarter, up from $11.5 billion during the same period a year ago.
To put that number into context, $10.7 billion of its $11.5 billion of indirect secured consumer loans in 2019 were for auto loans, according to Big Wheels Auto Finance Data.
Fifth Third Bank’s indirect consumer portfolio grew steadily last year, logging sequential increases of 6% in the fourth quarter, 4% in the third quarter, and 3% in the second quarter. Average yield for indirect consumer loans at yearend, however, dropped 15 basis points to 3.93% from the end of 2019.
The net charge-off rate for Fifth-Third’s indirect secured consumer portfolio reached 0.28% in the fourth quarter, an increase of 17 bps from last quarter, but a decrease of 28 bps from the same period a year ago.
The bank also experienced an uptick in the number of indirect secured consumer loans in a deferral program during the fourth quarter, to 2% from 1% in September. Deferrals, however, have decreased from 10% of the portfolio in June during the height of the COVID-19 pandemic. Of consumers who have exited a deferral program, 92% are now current with their payments.
“We continue to see consumer loss rates lower than normal. We saw them lower than normal in 2020. We expect that to continue in 2021, as the impact of stimulus rolls through the portfolio,” Richard Stein, the bank’s chief credit officer, said on the earnings call.
In line with its forecast, the bank decreased its allowance for credit losses as a percentage of the portfolio for indirect secured consumer loans 2 basis points to 0.97%, or $132 million, down from last quarter’s 0.99%, or $128 million.
Meanwhile, the rate of loans 30-89 days past due totaled 0.33% of the bank’s complete portfolio, an increase of 4 basis points from the third quarter and flat YoY, according to the earnings presentation. Auto makes up about 34.4% of the banks consumer portfolio, which also includes home equity loans, credit card, and residential mortgages.
Fifth Third has a footprint in 10 states, including Florida, Georgia, North Carolina, Ohio and West Virginia. The bank had $6.8 billion in auto originations in 2019, according to Big Wheels.
Shares of Fifth Third Bancorp [Nasdaq: FITB] were trading at $28.44 as of market close, down 4.40% since market open. Fifth Third has a market capitalization of $20.26 billion.
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