Provisions for credit losses are up for Santander Consumer USA, not because of any unexpected problems with loan performance, but because of higher volumes overall, because of seasonality, and because SCUSA is retaining high-risk, high-return loans on its own books and selling off low-risk, low-return loans to investors, said SCUSA CEO Jason Kulas.
“Higher provisions are just an impact of the mix you have on your books,” Kulas said today at the Barclays Global Financial Services Conference in New York. “We’ve got a lot of assets that are high-margin assets on the books,” he said.
Analysts questioned Kulas about higher loan-loss provisions in SCUSA’s conference call announcing second-quarter earnings, on July 30. The company reported a provision for credit losses of $738.7 million for the second quarter, up from $589.1 million a year earlier.
Besides a higher mix of riskier loans, SCUSA said retained volume also increased 34%, which helped drive the year-over-year quarterly increase. Retained volume means loans SCUSA kept on its own books, as opposed to selling them off as asset-backed securities.
Total originations were $7.6 billion in the second quarter, up from $6.7 billion a year ago. SCUSA, which is majority owned by the U.S. subsidiary of Spain’s Banco Santander, provides private-label loans and leases in the United States for FCA US LLC, the former Chrysler Group.
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