Third-quarter auto loan and lease originations dropped 47 percent at Wells Fargo and 5 percent at Chase as the lenders continued to tighten their credit standards, executives said during earnings calls last week.
Wells Fargo's auto originations in the quarter nearly halved from a year earlier to $4.3 billion. CFO John Shrewsberry and CEO Tim Sloan said during the company's earnings call on Friday that they expect auto loan volume to continue to decline through the next few quarters. But because the lender has tightened its underwriting criteria, Shrewsberry said, the overall loan quality will improve.
Sloan said that stricter underwriting standards makes the auto business more efficient. "If we think that there is more opportunity from a risk-reward standpoint as it relates to credit, we will take advantage of that. But I think the decisions we've made over the last year [have] really worked," Sloan said, adding that the borrowers' average credit score has improved.
The auto origination decline will likely continue through most of next year, Sloan said, "and probably bottom out again, sometime, hopefully, at the second half of next year.
"We like that business. Don't get us wrong," he said. "Our expectation is over time, we will continue to gain share in that business. But right now, we are cautious."