SCUSA Originations Up 65% Over Last Year

SCUSA grew its Q2 loan portfolio by about $1 billion dollars.

Santander Consumer USA Holdings Inc. (SHUSA), the parent company for Santander Consumer USA (SCUSA), said its total Q2 auto loan originations grew to $6.7 billion, up from the $5.7 billion the company reported in Q1 2013, but down from the 7.3 billion in Q1 2014.  Total origination growth was 65% for the first half of 2014 versus 2013.

SCUSA’s Q2 net charge-off ratio fell to 5.8%from 6.4% for the first quarter, but increased from 4.2% for the second quarter 2013.  The delinquency ratio increased to 3.8% as of June 30, up from 3.1% the previous quarter, and up from 3.5% the same time last year.

The provision for loan losses increased to $589 million in the second quarter 2014, up from $408 million in the second quarter 2013, but a decrease from the $699 million the company reported in the first quarter of 2014.

The allowance for loan losses increased to $3.1 billion in the second quarter 2014, up from $2.9 billion in the first quarter 2014, resulting in an increase in the allowance to loans ratio to 11.6%, up from 11.0%, which was driven by the seasonality in SCUSA’s forward-looking provision model, the company says.

“The allowance to loans ratio has increased moderately due to seasonal impacts,” said Jason Kulas, president and chief financial officer in a release today. “We see the effects of seasonality, most notably in the second quarter, due to the provision model capturing two fourth quarters of seasonally worse performance; however, absent this impact in the model, we expect to have a stable ratio outlook.”

SCUSA said its portfolio growth rate has stabilized in comparison to the growth it saw during the start of its Chrysler Capital relationship in 2013.  SCUSA says the more moderate origination growth in Q2 led to slightly higher delinquency ratios quarter over quarter. And, in line with seasonal trends, the company says it saw a decline in net charge offs in Q2 compared to Q1.

Overall, SCUSA said its net income reached $246.5 million, or $0.69 per diluted common share, compared to net income attributable to SCUSA shareholders for second quarter 2013 of $181.9 million, or $0.53 per diluted common share.

But SCUSA also said in its investor presentation that it wouldn’t pay dividends until the Federal Reserve issues a non-objection following the submission of SHUSA’s capital plan or issues a written non objection to the payment of a dividend by SCUSA.  Earlier this month, SCUSA filed an 8-K that said management estimates it needs to hire 100 new full time employees, directly and indirectly related to compliance, including CCAR.

In another SEC filing earlier this week, the SHUSA board of directors said it had named William P. Hendry as a director and member of its audit committee.  Hendry is also a non-executive director and chairman of the audit committee at Carlyle GMS Finance and at NF Investment Corp, a Carlyle company. In the same filing, the company said the board named John H. Corston a director and chairman of the Board Enterprise Risk Committee.

This month Corston also began serving as the chief risk officer of SHUSA.