Santander Consumer USA managed to lower net charge-offs by increasing its recovery volume during a period of growing originations, the company announced during its first quarter earning call.
Gross charge-offs during the quarter were actually up 40 basis points year over year to 18.5% of the portfolio. Yet, the lender managed to grow its auction-plus recovery rate by 400 basis points for a net charge-off rate of 8.3% — 50 basis points lower year over year. Delinquencies 30 days or more past due remained flat at 11.1% of the portfolio.
Meanwhile, Santander grew first quarter originations by 18.8% year over year to $6.3 billion. The growth was largely driven by a 24% increase in Chrysler Capital retail contracts compared to the first quarter 2017.
“We’ve had a very good start to the year in terms of originations and credit performance,” Chief Financial Office Juan Carlos Alvarez de Soto, said on the call. “We feel good about where we are and going into the second quarter.”
The banks core retail contracts — the largest portion of its originations — also grew by 4% year over year. However, Chief Executive of Santander Consumer Scott Powell said that may have been a one-time bump due to tax cuts.
“We do believe that folks are starting to see the impact of tax [cuts] on their paycheck, whether that translates into demand for cars is yet to be seen, but it’s certainly not going to hurt us,” he said. “Tax refund season is big for a non-prime business and it’s a big driver [of originations]. We expect declines in core nonprime for the rest of the year, but [continued gains] for the Chrysler part of the business.”
