Ally Financial in Detroit has decided to exit the business of making loans for purchases of recreational vehicles, airplanes and other transportation equipment.
Ally notified RV dealers in early August of its decision, the $147 billion-asset company said in a news release Wednesday. Ally decided to stop making the loans to “leverage its strengths [and] better optimize capital allocation,” it said.
“These actions allow us to put more energy and more resources into our core businesses and provide the greatest value to all of our stakeholders from dealers and consumers to shareholders and employees,” Doug Timmerman, president of auto finance, said in the release.
An Ally spokeswoman declined to disclose the size of the bank’s RV and transportation loan portfolio, which is included in the bank’s broader auto loan book. Ally will retain its commercial services group, which finances and leases commercial vehicles.
Ally’s decision comes as banks have seen
At the $105 billion-asset Huntington Bancshares in Columbus, Ohio, average RV and marine loans in the second quarter rose 31% to $2.7 billion from a year earlier.
The $22 billion-asset Bank OZK has increased its indirect RV and marine loan book to $1.5 billion, as the Little Rock, Ark., bank likes its customers’ financial profile, said George Gleason, chairman and CEO. In recent quarters, RV and boat loan borrowers have had an average credit score of 792.
“It’s a high-prime, super-prime-type customer base,” Gleason said during a July 12 conference call. “There’s a strong emphasis on … people who have owned multiple RVs and multiple boats before, so they understand what they’re getting into.”
Other large institutions in the RV loan business include U.S. Bancorp in Minneapolis and Bank of the West in San Francisco.
Though it is leaving the RV business, Ally has experienced strong growth in its core business line of auto lending. In the second quarter, consumer auto originations rose 12% to $9.6 billion. The net interest margin on those loans widened to 6.08% from 5.8%.
