HDFS Losses ‘Temper,’ Yet Continue to Rise in 1Q

Photo by William Hoffman / Royal Media Group

Photo by William Hoffman / Royal Media Group

Harley-Davidson Financial Services originated $709.8 million — up 3.8% year-over-year — in the first quarter, according to the company’s earnings call today.

Annualized net losses — at 2.3% in 1Q — were up 33 basis points from the prior-year quarter, and to top the highest level the captive has seen since the fourth quarter of 2010, when losses were at 2.11%.

The increase in credit losses was due to higher delinquencies across the portfolio, John Olin, Harley-Davidson Inc.’s chief financial officer, said during the call. 30-day delinquencies reached 3.17% in 1Q, up from 2.88% in the prior-year quarter.

While both losses and delinquencies are up, the rate of increase has “tempered from last year’s run rates,” Olin said on the call. HDFS continues to offer “robust liquidity” and it contributes “strong profitably” to Harley-Davidson Inc., he added.

Additionally, financial services operating income was down 6.6% to $52.6 million in 1Q, as compared to the prior-year quarter, due to increased provision for retail loan losses, Olin said.

The captive’s originations mix remains unchanged, with 80% prime loans and 20% subprime loans, despite approval rates in the subprime tier tightening in recent months, a franchise dealer who wished to remain unnamed, told Powersports Finance in February. “For prime customers, we have not seen a change,” he said. HDFS appears to be “holding the line” on subprime. “The biggest impacts have been on documenting stipulations, and HDFS’s willingness to make exceptions,” on subprime deals that were not immediately approved, the dealer said.

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