Santander Originations Drop 24% in 4Q

Santander Consumer USA disclosed “significant” declines in its Chrysler Capital, leasing and total auto originations for both the fourth quarter and overall year in its latest earnings report.

The company originated $4.5 billion in auto loans for the fourth quarter, down from $5.9 billion the year prior — a 24% year-over-year decline. For the fiscal year 2016, total auto originations dropped 20% compared to the previous year in full.

Leasing originations dropped 4% to $973 million in 4Q, compared to $1 billion in the year prior period. 

Chrysler Capital generated $1.5 billion in originations in 4Q — nearly half the $2.9 billion in volume generated the year prior. However, in part through Chrysler, the company has increased the credit quality of its originations. The average FICO for retained 2016 originations were at 598, up 14 points versus 2015.

“If you look year over year, our originations were down pretty significantly, and that’s the result of some of the moves we made in 2016,” a company executive said during the earnings call. “What we were seeing is relative to our view of the market there were some people who had a more aggressive view on those lower subprime deals.”

While nonprime originations under a FICO of 640 were down $590 million in 2016 compared to 2015, that did not translate into a growth in near-prime originations. Santander’s originations above a 640 score represented 32% of its profile in the fourth quarter, down from 39% of the portfolio the year prior.

“What we saw in the later part of 2016 is a pocket of nonprime where we were overpriced, so we went in and very surgically looked at pricing in this part of the business,” one of the company’s executives said during the earnings call. “If you look at the deep subprime parts of the business, I think we’ll continue to do less of that, but we are looking across the nonprime spectrum where we see those pockets of opportunity.”

The company highlighted securitizations as a bright spot, noting, “We continued to be the largest auto ABS issuer in the market in 2016, issuing $8 billion in securitizations across all three of our platforms,” Izzy Dawood, chief financial officer, said in the filing.

Delinquencies 30 to 60 days past due rose in the quarter to 10% of the portfolio up from 9.1% the year prior. Delinquencies over 61 days past due also grew — to 4.6% of the portfolio up from 3.8% the previous year.