SAN FRANCISCO — During the company's recent third-quarter conference call, Wells Fargo chief financial officer Howard Atkins pointed out that the auto finance business has been gaining market share in both new and used auto loan originations.

In fact, the company was able to generate record monthly auto originations of $1.5 billion for August, thanks largely to Cash for Clunkers, he indicated.

More specifically, he said during the pre-recorded call, "The auto business continued to benefit from industry trends, gaining market share in both the new- and used-car space, while simultaneously improving credit quality.

"Revenues grew 12 percent annualized from the second quarter," he added.

Looking specifically at the loans generated from Cash for Clunkers, Atkins explained, "The loans originated under this program have been high quality with higher levels of cash down and better customer credit scores than existing auto loans in our portfolio."

As for losses, while these tend to rise in the second half of the year, the CFO noted that those in the company's indirect auto portfolio were actually down a bit from the second quarter, which is mostly due to higher used-car prices. The executive pointed to the Manheim Used Car Index which has stood at record levels of late.

"We also benefited from an improved customer mix within our portfolio and tighter underwriting standards we put in place at the start of this credit cycle," Atkins highlighted.

Reviewing results more closely, SubPrime Auto Finance News found that outstanding auto loans in the direct portfolio have hit $5.251 billion, compared with $5.244 billion in the previous quarter.

Net charge-off in Wells Fargo's direct auto business are down 5 percent quarter over quarter, as a percentage of average loans, this came in at 4.36 percent, compared with 4.10 percent in the previous quarter.

Auto loans 30-plus days past due as a percentage of loans were 6.63 percent, compared with 6.22 percent in the second quarter in the direct portfolio.

Continuing on to review the indirect portfolio, SubPrime Auto Finance News discovered that outstanding auto loans came in at $26.038 billion, compared with $24.5 billion in the prior quarter.

Meanwhile, net charge-offs came in at 2.36 percent, compared with 2.43 percent in the previous quarter.

Loans more than 30 days past due came in at 2.21 percent, compared with 2.39 percent in the second quarter.

Furthermore, Wells Fargo continues to run off its legacy indirect auto loan portfolio. This portfolio now stands at $12.9 billion, compared with $14.5 billion in the second quarter and $18.2 billion in the fourth quarter of last year. Overall, this portfolio is down 29 percent from the fourth quarter of 2008.

When the merger with Wachovia occurred, Wells Fargo elected to utilize Wachovia's indirect auto loan channel and slowly allow its portfolio to run off. However, Wells Fargo continues to run its direct auto loan channel.

For this liquidating portfolio, net charge-offs came in at 5.97 percent as a percentage of average auto loans, compared with 4.87 percent in the second quarter.

Auto loans 30-plus days past due came in at 8.60 percent as a percentage of average loans, compared with 7.2 percent in the prior quarter.

Looking at results company-wide, Wells Fargo reported record net income of $3.24 billion for the quarter, up 98 percent from the prior year. Also, for the nine-month period, the company reported a record $9.45 billion net income, up 75 percent year-over-year.

Touching on these results was John Stumpf, chief executive officer, who said, "The Wells Fargo-Wachovia merger, agreed to a year ago, is exceeding our expectations and already adding value for many of our 70 million customers across North America. Merger costs have been significantly less than originally expected. With our 80-plus businesses pulling the stagecoach, the diversity of our business model again showed significant power to generate capital internally.

"We had solid performance across our company — especially among counter-cyclical businesses such as deposits, residential mortgages, debit card and asset-based lending. We're also doing what's right for our mortgage customers having difficulty making their payments on time. We've offered home payment relief to 1.3 million customers so far this year, including 355,000 loan modifications," he continued.

Stumpf also thanked Dick Kovacevich for his hard work. Kovacevich is planning to step down as chairman and a director at the end of the year and retire from the company in early 2010.