AmeriCredit: Originations Infrastructure Is Rebuilt
FORT WORTH, Texas – Touting year-over-year improvements in originations, credit performance and earnings, AmeriCredit officials say the company is in a good position to rebuild its business in 2010.
The subprime lender earned $46 million during the December quarter, compared to a net lost of $35 million in the year-ago quarter. Originations were up from $229 million in the September quarter to $379 million, while credit losses decreased from 9.5 percent last year to 8.9 percent.
Additionally, the company saw significant moderation in the rate of seasonal deterioration in credit performance from the September 2009 to December 2009 quarter compared to the same periods in 2008 and 2007, with losses for the quarter increasing 50 basis points during the recent period compared to the sequential increases of approximately 220 basis points in 2008 and 150 basis points in 2007.
“Several factors are driving our improved credit results,” said Dan Berce, the company’s president and CEO. “First, deterioration in the jobs market has moderated and overall economic conditions have stabilized. Second, the composition of our portfolio continues to shift away from the weaker 2006 and 2007 origination vintages with an increasing concentration of better performing 2008 and 2009 loans. And third, we have benefited from the sustained strength of the used-car wholesale market.”
Berce added that the company expects to see sustained improvements in overall credit metrics in calendar 2010 as it moves past the peak loss periods of its 2006 and 2007 vintages, and as the stronger 2008 and 2009 vintage originations become a more significant percentage of the portfolio.
AmeriCredit added that it has substantially rebuilt its originations infrastructure, as it increased the number of producing dealers from 4,900 in the September quarter to 6,700 in the year-end quarter. Officials also touted the reopening of one of its regional credit centers, which also received an increase in staffing in its sales, underwriting and funding departments.
The only bad news is that consumer demand for loans remained depressed during the quarter despite improving capital markets, which Berce said allowed the company to reduce annual percentage rates to 17.9 percent in the year-end quarter from 19.1 percent in the September quarter. Still, he said the more favorable conditions could lead to an increase in the company’s credit-risk appetite this year.
“Prospectively, as we see favorable credit development on recent vintages, we may selectively increase our credit risk appetite in geographic regions where we see stable to improving economic conditions,” Berce said. “We expect modest growth in originations for the next several quarters, which, if achieved, will result in our portfolio troughing in the $8 to $8.5 billion range in fiscal 2011.”
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