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First Quarter Snapshot: Captives and Non-Captives Report Lower 1Q Losses

April 24, 2009

The auto finance industry struggled through the first quarter of this year, but several companies reported lower losses compared to the fourth quarter 2008.

AmeriCredit

AmeriCredit Corp. had a net income of $9.8 million for its third quarter ended March 31, 2009, compared to earnings of $38.2 million in the year-ago period.

For the nine months ended March 31, 2009, AmeriCredit reported a net loss of $17.4 million versus earnings of $80.9 million for the nine months ended March 31, 2008.

Finance receivables 31 to 60 days delinquent stood at 6 percent in the third quarter 2009, compared to 5.3 percent in the third quarter 2008. Accounts more than 60 days delinquent were 3 percent of the portfolio at March 31, 2009, compared to 2.3 percent a year ago.

The net charge-off rate was 7.8 percent in the third quarter 2009, up from 6.6 percent in the year-ago period. For the nine months ended March 31, 2009, annualized net charge-offs were 8.2 percent, compared to 6.3 percent for the same period last year.

Loan originations totaled $210.1 million for the quarter ended March 31, 2009, compared to $1.3 billion for the same quarter last fiscal year. Originations for the nine months ended March 31, 2009, were $1.1 billion, compared to $5.5 billion for the same period a year earlier.

BMW Financial Services

BMW Financial Services reported in March a loss before tax of euro 292 million, compared to a profit of euro 743 million in 2007. The segment increased its revenue to euro 15,725 million, an increase of 12.8 percent from euro 13,940 million posted in 2007.

The earnings performance of this segment was severely impaired in 2008 by a number of factors, including the recognition of a risk provision expense of euro 1,057 million for residual value risks and bad debts.

The volume of new retail customer contracts rose by 3.1 percent to euro 29,341 million. The proportion of new BMW and MINI brand cars financed by the financial services segment totaled 48.5 percent, up by 3.8 points compared to the previous year. This increase was largely attributable to the higher proportion of credit financing, while lease financing remained fairly constant.

Capital One

Capital One Financial Corporation had a net loss for the first quarter 2009 of $111.9 million, compared with a net loss of $1.4 billion in the fourth quarter 2008 and $548.5 million in first quarter 2008.

The auto finance division reported $71.4 million profit in the first quarter 2009. The division posted a net loss of $924 million in the fourth quarter 2008, and a net loss of $82.3 million in the first quarter 2008.

Loan originations totaled $1.46 billion in the first quarter 2009, down slightly from $1.47 billion recorded in the fourth quarter 2008. The total, however, represented a sharp drop from $2.44 billion recorded in the year-ago period.

Auto finance delinquencies and charge-off rates improved in the first quarter as a result of expected seasonality, improved used-car prices and recovery values, and solid performance in recent originations.

The 30-day delinquency rate was 7.52 percent, down from the 9.91 percent recorded in the fourth quarter 2008, but still higher than the 6.42 percent in the first quarter 2008. The net charge-off rate was 4.88 percent, down from the 5.67 percent posted in the fourth quarter 2008, but still higher than the 3.98 percent in the first quarter 2008.

Ford Motor Credit

Ford Motor Credit Company reported a net loss of $13 million in the first quarter of 2009, a decrease of $37 million from net income of $24 million a year earlier. On a pre-tax basis, Ford Motor Credit reported a loss of $36 million in the first quarter, compared with earnings of $32 million in the previous year.

On March 31, 2009, Ford Motor Credit’s on-balance sheet net receivables totaled $104 billion, compared with $116 billion at year-end 2008. Managed receivables were $106 billion on March 31, 2009, down from $118 billion on December 31, 2008.

General Electric

General Electric’s Capital Finance division earned $1.1 billion in the first quarter 2009, down 58 percent from the $2.6 billion earned in the year-ago period. While the segment remains on track to be profitable this year, revenues and profitability declined on a year-over-year basis in the financial services business, as the company continues to experience rising delinquencies, said GE Chairman and CEO Jeff Immelt.

GE Money Bank, a lending source for the automotive and powersports industry, is under the umbrella of the GE Money division.

JPMorgan Chase & Co.

JPMorgan Chase & Co. reported first-quarter 2009 net income of $2.1 billion, compared with net income of $2.4 billion in the first quarter of 2008.

Average auto loans were $42.5 billion, down 2 percent. Auto loan originations were $5.6 billion, down 22 percent from the prior year and up 100 percent from the previous quarter.

Wells Fargo & Company

Wells Fargo & Company, which now includes Wachovia, reported net income of $3.05 billion for the first quarter 2009.

The company had combined charge-offs of $3.3 billion, including $371 million in the Wachovia portfolio, in the first quarter. Legacy Wells Fargo charge-offs were $2.9 billion compared with $2.8 billion in fourth quarter 2008.

Losses in the auto portfolio decreased $47 million from fourth quarter 2008, reflecting a decline in core net charge-offs, reflecting lower severity, relatively stable default frequency trends, seasonality benefits and portfolio balance reduction, which mainly occurred in indirect auto over the last two years.

The net charge-off rate for direct loans was 4.64 percent in the first quarter, down from 4.87 percent in the fourth quarter 2008. The 30-day delinquency rate was 5.35 percent, down from 6.8 percent in the fourth quarter 2008.

The net charge-off rate for indirect loans was 3.28 percent, down slightly from 3.87 percent in the fourth quarter 2008. The 30-day delinquency rate was 2.4 percent, down from 3.14 percent in the fourth quarter 2008.

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