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Wells Pulls Back, Chase Sees Thinner Margins

April 17, 2015
3 min to read


SAN FRANCISCO and NEW YORK — The country’s largest auto lender, Wells Fargo, tempered its auto lending activities during the first quarter of 2015, officials reported during a conference call this week. Also reporting quarterly earnings was J.P. Morgan Chase, which saw solid loan and lease growth in the automotive space.


Auto originations at Wells Fargo hit $7.1 billion in the first quarter, up 6% from the last quarter of 2014. However, that number of originations was down from the same period last year, according to CFO John Shrewsberry. “While we continued to benefit from the strong auto market, new originations were down 10% from a year ago, reflecting our continued risk and pricing discipline in a competitive market,” he said.

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The finance source recently acted to mitigate the risk associated with auto lending by capping the dollar volume of its subprime loans for 2015 at 10% of its overall auto loan originations. The move came at a time when state and federal regulators have issued subpoenas to several subprime finance sources requesting documents related to their subprime auto finance businesses, although bank officials have maintained that the cap was unrelated to regulatory activities. Last year, Wells Fargo originated $29.9 billion in auto loans.


“Auto … it’s grown but kept relatively stable. It’s gotten to be a more competitive market, and we’ve picked our spots, I think, a little bit more delicately,” Shrewsberry added.


Also on April 14, J.P. Morgan Chase reported that its card, commerce solutions and auto business had a net income of $1.1 billion, down 3% year on year with a return on equity of 22%.


“… In auto, we saw solid loan and lease growth partly offset by spread compression. Expense was up 2% year on year, predominantly driven by higher auto lease depreciation,” said J.P. Morgan CFO Marianna Lake. The average amount of auto loans were up 4% year over year and 3% from the previous quarter. Originations were up 9% over the first quarter 2014 and 6% from 2014’s closing quarter.


“In auto, results continue to reflect steady growth in new-vehicle sales and stable used-car values,” Lake explained. “It was a 14th consecutive quarter of loan and lease growth with average balances up 6% year on year. [On a year-to-date basis], the pipeline remains healthy, reflecting continued strength in the market as well as the strength of our manufacturing partners.”

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Both finance sources reported strong financial results, with Wells Fargo reporting a net income $5.8 billion, or $1.04 per diluted common share, for first quarter 2015 — up $95 million from the prior quarter. Revenue was $21.3 billion, compared with $21.4 billion in fourth quarter 2014.


J.P. Morgan reported a first quarter net income of $5.9 billion, or $1.45 per share — up 12% from the prior year. Net income was $24.8 billion, up $967 million compared with the prior year.

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