Huntington Bancshares Incorporated (NASDAQ:HBAN)’s Connecticut connection
Huntington Bancshares Incorporated (NASDAQ:HBAN) announced that it is now expanding its successful auto-dealer financing business into Connecticut. Key personnel have been deployed to the state to back the initiative. The New England region had been the focal point of the company’s expansion strategy and the Connecticut expansion completes it. The company already had a meaningful relationship with car dealers in the New England states that it served. The company said that the Connecticut dealers wanted to be associated with a bank that had a proven track record of consistent rapid funding, underwriting as well as superior customer service.
An experienced hand
The company has hired a highly experienced team that has knowledge of the local market and dealer- applications are currently being processed. HBAN hopes to provide financing-solutions to over 140 dealers across Connecticut. For over 60 years, HBAN has been providing financial solutions to auto dealers. This includes financing new as well as used automobiles purchased by a dealer’s retail customers. The company also provides commercial loans to dealers to primarily finance new and used vehicle-inventory.
The market is very competitive, not just because of the other companies in the market but also because carmakers have their own finance offerings. This is called captive finance and it helps dealers with moving their products off their lots. These days, banks are keen on lending as the yield on car loans is higher than that which can be expected on home equity lines and mortgages. This is primarily because auto loans are of much shorter-duration duration than mortgages. This automatically protects banks from the risk of increasing interest-rates. The average life of most auto loans is around two-and-half years and the bank does not get locked-in for an extensive period with them.
With banks avoiding loan portfolios that are skewed too heavily towards long-term, fixed rate mortgages, car loans become an obvious choice. When it comes to other financing, if there is a sharp rise in interest rates from otherwise historic lows, it is not possible for banks to re-price their assets as fast as they have pay out on deposits. This wrenches their profits. But an auto loan is very different, the cash flow is good and it is of a short duration. Huntington Bancshares Incorporated (NASDAQ:HBAN) it seems, is moving in the right direction.