Prime moves push GM Financial revenues up

General Motors’ captive, GM Financial, has reported a sharp increase in lease originations for the first quarter of 2016, as the company seeks to build on its position as the exclusive provider of finance for the auto manufacturer.

GM Financial announced that net income for the quarter ended March 31, 2016 was $164 million, up from $150 million for the same quarter the previous year.

Operating lease originations were $6.8 billion for the quarter ended March 31, 2016, more than double the $3 billion recorded in Q1 2015, and up from $5.4 billion for the quarter ended December 31, 2015. Leased vehicles, net was $24.5 billion at March 31, 2016.

Retail loan originations were $4.1 billion for Q1 2016, compared to $4.4 billion for the quarter ended December 31, 2015, and $4.1 billion for the quarter ended March 31, 2015. The outstanding balance of retail finance receivables was $30.3 billion.

The company’s move into overseas markets is also performing well. Earnings resulting from GM Financial’s equity investment in SAIC-GMAC, a joint venture that conducts auto finance operations in China, were $36 million for the three months ended March 31, 2016 compared to $28 million for the three months ended March 31, 2015.

Retail finance receivables 31-60 days delinquent were 3.1% of the portfolio at March 31, 2016 and 3.4% at March 31, 2015. Accounts more than 60 days delinquent were 1.4% of the portfolio at the same point in both 2016 and 2015. Annualized net credit losses were 1.9% of average retail finance receivables for the quarter ended March 31, 2016 and 1.8% for the quarter ended March 31, 2015.

Prime moves

There are also signs that GM Financial is starting to change the make-up of its lending portfolio, which started with a focus in the sub-prime category following its legacy acquisition of AmeriCredit in 2010.

In response to analysts’ questions, GM Financial CEO Dan Berce said: “The credit performance of the lease portfolio is strong, commensurate with the predominantly prime credit profile of that portfolio.”

According to the figures, prime originations (loans and leases originated by buyers with credit scores of 680 and above) grew 125% in the US at the start of the year. Near prime loan and lease originations, by buyers with credit scores of 620 to 679, grew 29% percent.

In contrast, sub-prime originations, by customers with credit scores under 620, grew 14%.
Compared with the same quarter in 2015, the percentage of originations classed as near prime dropped from 18% to 13%, while sub-prime originations fell even more sharply, down from 28.4% to 18.4%.

The prime-credit segment was the only category to grow in share, accounting for 68% percent of originations in the first three months of the year, compared to 53% in the same period in 2015.

The company had total available liquidity of $12.7 billion at March 31, 2016, consisting of $2.9 billion of cash and cash equivalents, $8.4 billion of borrowing capacity on unpledged eligible assets, $0.4 billion of borrowing capacity on committed unsecured lines of credit and $1billion of borrowing capacity on a junior subordinated revolving credit facility from General Motors.