Santander Consumer USA experienced recovery on net charge-offs accompanied by growth in auto origination volume, on trend with other lenders’ second quarter performances.
The Dallas-based lender posted a 34% year-over-year increase in auto originations to $10.5 billion, according to the company’s earnings release. Growth in SCUSA’s portfolio offset a dip in Chrysler Capital originations, which fell 2% YoY to $4.6 billion. The lender’s Fiat Chrysler Automobiles penetration rate also decreased 330 basis points YoY to 33.8%. FCA sold 485,312 vehicles in the second quarter, an increase from 367,086 vehicles sold in the same reporting period a year ago.
Still, outstanding loans and leases clocked in at $49.6 billion, a 3.9% YoY increase.
Increased origination volume is largely due to SCUSA’s strong relationships with its dealer partners, the recovering economy and high consumer demand, Chief Financial Officer Fahmi Karam said on today’s earnings call.
Credit performance, on the other hand, was impacted by a pullback on deferral programs and government assistance in the first quarter, contributing to an increase in early-stage delinquencies in the second quarter, Karam said. Loans 30 to 59 days past due increased 110 bps sequentially and 120 bps YoY to 5.5%, according to the company’s earnings release. Loans 59-plus days past due remained flat YoY at 2.4%.
SCUSA is the fifth auto lender this quarter to record positive recoveries on net charge-offs, which came in at 1% of the total portfolio. The company’s net charge-off rate stood at 3% last quarter and 6% a year ago. Ally Financial, Capital One, Citizens One Auto Finance and U.S. Bank also posted positive recoveries on net charge-offs this quarter, driven by elevated used car values and releases in credit loss reserves.
Due to improving economic conditions, credit quality and portfolio mix, SCUSA decreased its allowance for credit losses by $186 million quarter over quarter to $5.8 billion, or 17.8% of total outstandings. Allowance accounted for 18.9% of outstanding loans and leases in the first quarter and 19.2% in the same reporting period last year.
Meanwhile, a special committee is still reviewing the proposed acquisition of Santander Consumer USA’s outstanding common stock by its parent company Santander Holdings, SCUSA Chief Executive Mahesh Aditya said. The wholly-owned subsidiary of Madrid-based Banco Santander announced interest in acquiring SCUSA’s outstanding shares earlier this month. SHUSA currently owns 80.25% of Santander Consumer USA. No decision has been made and no expected timeline was given in today’s earnings call.
Shares of Santander Consumer USA [NYSE: SC] were trading up 0.24% at market close at $40.95 as of 4 p.m. ET today. SCUSA has a market capitalization of $12.53 billion.
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