FORTH WORTH, Texas -

As the company ramps up its prime financing program, General Motors Financial still is keeping an eye on its subprime business as a Wall Street analyst touched on recent inquiries from the U.S. Department of Justice and the Securities and Exchange Commission.

GM Financial rolled out its prime loan product to all GM dealers on Nov. 1, and with just two months to generate paper, the company reported that its prime bookings totaled $493 million for the year. The extra prime paper also elevated the average FICO score for Q4 originations as the company pegged the typical score at more than 40 points higher than what it saw in the same quarter a year earlier.

However, 31.1 percent of the subprime auto financing the parent automaker generated in the fourth quarter still went into the GM Financial portfolio. The company reported Q4 North American originations came in at $1.934 billion with $507 million of that figure being connected with used-vehicle financing at GM stores, an amount more than triple the figure posted in the year-ago quarter.

With subprime still a major part of the company business, BlackRock analyst Bryan Jacobi asked GM Financial leadership during its recent conference call about subprime securitizations. Jacobi’s question arrived in light of the federal agency inquiries and since, in his opinion, performances have been “quite good.”

In response, GM Financial chief financial officer Chris Choate said, “The performance of auto ABS, not only currently but back across the economic cycle, was strong and stable. Everybody got repaid interest and principal in a timely manner as really no defaults occurred.

“Auto ABS is maybe being evaluated by the different governmental agencies perhaps unfairly, in light of what happened with subprime mortgage securitizations as kind of the go by,” Choate continued.

Then Choate discussed why GM Financial didn’t have any of significance to share in connection with the DOJ or SEC matters that first were disclosed last summer.

“Really the reason we haven't updated or changed any of our disclosures related to those ongoing matters is really they’ve been fairly stagnant, if you will, relative to the interactiveness between us and those agencies. We certainly are cooperating. We provided lots of data,” he said.

“There have been certain direct interactions between the company and different agencies. But really, sort of the ball is in the agency’s court to move forward. We don’t really have a timeline for when or how that may happen,” Choate continued.

“Certainly any time you have agencies investigating your business, it's a serious matter and we take it seriously. And there is a certain element of concern. But again, the facts on the ground relative to how auto ABS performed, in our view, sort of mitigates a negative outcome,” he went on to say.

More Details About Portfolio Health

GM Financial’s North American delinquencies stayed relatively flat year-over-year during the fourth quarter. The company reported delinquencies up to 60 days came in at 7.4 percent of the portfolio, and total delinquencies stood at 9.9 percent as of Dec. 31. A year earlier, the readings were 7.5 percent and 10.0 percent, respectively.

GM Financial mentioned its annualized net quarterly credit losses remained almost flat year-over-year as well, coming in at 3.6 percent. The company’s recovery rate did soften a bit on a sequential and year-over-year basis, dipping to 53.1 percent.

“Consumer loan credit performance in North America, these metrics are very stable quarter-over-quarter, year-over-year,” GM Financial president and chief executive officer Dan Berce said. “I should say, just like subprime originations, we see a distinct seasonal trend in subprime credit, with the March and June quarters being the strongest and the December quarter typically being the weakest.

“We’ve seen a bit of softness in the market year-over-year, and we do expect to see continued moderation in used-car pricing throughout 2015, albeit from a historical standpoint still quite good,” Berce continued. “Going forward, our credit metrics will be impacted by our increasing mix of prime originations and so we should see a favorable impact to overall North America credit metrics, delinquencies and losses going forward.”

Enhancing Floor-Planning Business

GM Financial closed the year with 487 dealers with an active floor-planning account, up from 309 stores a year earlier. The increase pushed the company’s outstanding commercial lending portfolio past a new threshold — up to $3.2 billion  

Berce insisted GM Financial’s goals for its commercial business haven’t changed, even though analysts believe the conditions are ripe for more activity there since the company now offers a full suite of financing products and GM is pushing its leasing activity to the captive.

“When we launched the business less than three years ago, we articulated that over a number of years we'd like to get to a 20-percent type share target. And we’re kind of halfway into reaching the target. We’re at around 10 percent now,” Berce said.

“If we keep going on the rate we're on of market share gains, I think we’re very comfortable with that,” he continued. “I think that one thing that could change that trajectory is the fact that for the first time now going into 2015, in the U.S. we have complete captive type capability.

“We didn’t have the prime product in our suite before, and we got a lot of feedback from dealers saying, ‘Well, we'd like to use you as our floorplan source, but we’d also like to use you for all the products.’ We didn't have all the products so we were a bit handicapped,” Berce added.

“So I think that'll help the momentum in 2015 and beyond, but we still don’t have outsized share targets for commercial. We’re really quite pleased with the trajectory we’re on,” he went on to say.

Top-Line Performance

GM Financial reported earnings of $59 million for the fourth quarter, down from $121 million for the same quarter a year earlier

The company’s earnings for the year came in at were $537 million, down from $566 million for 2013.

Officials mentioned earnings include $13 million and $42 million in pre-tax acquisition and integration expenses for the quarter and year ended Dec. 31, 2013, respectively.

Additionally, earnings for the fourth quarter of 2013 include $15 million in pre-tax charges associated with discontinuing the Chevrolet brand in Europe.