Citizens Financial Group has announced a significant shift in its lending strategy, stepping away from originating indirect auto loans as of July 1, 2023. This move, revealed in a recent press release, signals a strategic realignment for the bank, emphasizing deeper customer relationships and optimized balance sheet management. While Citizens Bank will no longer be offering new indirect Citizens Bank Auto Loan options through dealerships, they have affirmed their commitment to servicing their existing auto loan portfolio. This article breaks down what this change means for consumers and the broader auto financing landscape.
Key Takeaways from Citizens Bank’s Announcement
The core message from Citizens Financial Group is clear: they are exiting the indirect auto loan origination business. Here are the key points to understand:
- End of Indirect Auto Loan Origination: As of July 1, 2023, Citizens Bank has ceased originating new auto loans through dealerships. This means car buyers will no longer be able to secure a citizens bank auto loan at the point of sale in a dealership setting.
- Strategic Balance Sheet Optimization: This decision is driven by Citizens Bank’s broader strategy to refine its balance sheet. By moving away from indirect auto loans, they aim to focus on lending areas that offer improved risk-adjusted returns and opportunities to strengthen relationships with their banking customers.
- Continued Servicing of Existing Loans: It’s important to note that this change only affects new loan originations. Citizens Bank will continue to service all existing citizens bank auto loan accounts. Current customers should expect no changes to their loan servicing experience.
Diving Deeper into the Strategic Shift
Citizens Bank’s decision to discontinue indirect auto loan originations is not an isolated event but rather a deliberate strategic move. Several factors underpin this shift:
- Focus on Relationship-Based Lending: The bank is prioritizing lending activities that foster stronger, more direct relationships with customers. Indirect auto loans, by their nature, are facilitated through dealerships, creating a degree of separation between the lender and the borrower. By concentrating on direct lending and other financial products, Citizens aims to deepen customer loyalty and cross-selling opportunities.
- Optimizing Risk-Adjusted Returns: In today’s financial environment, banks are keenly focused on maximizing returns relative to risk. Indirect auto lending can be subject to fluctuating market conditions and credit risks. By reallocating resources to other lending areas, Citizens Bank anticipates achieving more favorable risk-adjusted returns and enhancing overall profitability.
- Balance Sheet Management: Exiting indirect auto loan originations allows Citizens Bank to optimize its balance sheet. As stated in their announcement, the bank has been strategically reducing its auto loan portfolio since the third quarter of 2022. This move further streamlines their assets and allows for more focused capital deployment in alignment with their strategic objectives.
Impact on Consumers and Dealership Partners
For consumers in the market for a citizens bank auto loan, this announcement means that indirect financing through Citizens Bank at dealerships is no longer an option. However, it’s crucial to understand the nuanced impacts:
- Existing Citizens Bank Auto Loan Customers: There is no immediate impact. If you currently have a citizens bank auto loan, your servicing will continue uninterrupted. You will still manage your loan, make payments, and access customer support through the existing channels.
- Prospective Auto Loan Borrowers: Consumers seeking auto financing will need to explore other lenders for their auto loans. While Citizens Bank is stepping back from indirect auto loans, they continue to offer a broad range of other consumer banking and lending products. It is advisable for customers to explore direct auto loan options from other financial institutions or consider other financing avenues available at dealerships.
- Dealership Partners: Citizens Bank acknowledges the long-standing relationships with their dealership partners. This decision will impact these partnerships as dealerships will need to seek alternative financing sources for their customers who would have previously considered a citizens bank auto loan.
In conclusion, Citizens Bank’s exit from indirect auto loan originations reflects a strategic pivot towards relationship-based lending and balance sheet optimization. While this means the end of new citizens bank auto loan offerings through dealerships, the bank remains committed to servicing existing loans and providing a wide array of financial services to its customer base. Consumers looking for auto financing will need to adjust their approach and explore the diverse options available in the auto lending market.
