By Y.C., Taxi Driver, New York City
There’s a good reason your cab driver is so cranky: His livelihood might be teetering on the edge of default. According to a recent presentation prepared for Capital One Financial Corp. investors, some 81 percent of its $690 million in loans for taxi medallions are at risk of default.
Medallions, the small metal shields affixed to the hoods of taxi cabs, are issued by the local taxi authority and effectively allow the cabs to operate legally. Owning one used to be akin to owning a gas-guzzling, money-printing machine. Medallions in New York City traded at more than $1 million in 2014, but today’s prices are about half of that.
Now the share of taxi medallion loans Capital One thinks its borrowers won’t be able to repay in full has nearly tripled over the past year, to 51.5 percent. (Another 29 percent of loans are to stressed borrowers who could be in trouble soon.)
BankUnited told its investors in November that nearly 59 percent of its loans secured by taxi medallions were under water. Close to 95 percent of the BankUnited’s loans were to New York City borrowers. “This is the portion of our loan portfolio that we keep the closest eye on, for obvious reasons,” Rajinder Singh, then BankUnited’s chief operating officer, told investors last January.
The distressed taxi industry is under assault from ride-sharing service Uber Technologies Inc. and competitor Lyft Inc. Uber recently became the preferable mode of transportation for business travelers and has gained market share among leisure travelers.
In New York City, people took fewer trips and spent less on taxis during the first half of last year compared with 2015, according to a November securities filing from lender Medallion Financial Corp. Capital One doesn’t detail where its taxi customers are located, though Betsy Graseck, an analyst at Morgan Stanley, told clients in October she believes most of the loans are to New York City cab owners. Michael Bulger, a spokesman for Capital One, declined to comment.
Not every bank is struggling under the weight of delinquent taxi loans, according to Ethan Gerber, executive director of Greater New York Taxi Association. Lenders that seek out “compromises and solutions” are faring better than their peers, he said. Gerber added that banks that continue to lend to their taxi customers “will do far better than the ones that decided all of a sudden to clamp down on their borrowers.”
Reprinted with permission from YellowCabNYC.