How 3 Financial Institutions Boosted Auto Loan Margins in 2020
Banks and credit unions in 2020 faced many challenges, but by the third quarter, lending portfolios overall showed signs of recovery. However, a few lending sectors continue to struggle.
According to an article from American Banker, the NCUA quarterly report shows that credit unions in Q3 2020 saw overall interest income decrease 0.5%, to $60.5 billion as earning from investments fell more than 24%, to $6.3 billion. ROA dropped to 66 basis points, down from 98 basis points for the same period in 2019, but it was an improvement from the first and second quarters of 2020. In addition, student loan, commercial loan and credit card balance growth improved alongside lower delinquency rates.
Banks’ reporting is very similar. The FDIC recently reported the average net interest margin for commercial banks fell by 68 basis points from a year ago to 2.68%. Net interest income at these banks also declined by a record $10 billion, or 7.2% from Q3 2019. The net interest margin for community banks was pushed down 41 basis points year-over-year to 3.27%.
Worries remain for all lenders that delinquencies will rise as government assistance provided during the global pandemic is eliminated.
To better target your auto loan pricing and boost interest income, Open Lending’s Lenders Protection™ uses our proprietary data to gather a more comprehensive picture of potential borrowers, so you can say ‘yes’ to more loans – and interest income! We also back our loans with default insurance, so you can continue to confidently expand your auto loan portfolio.