Santander Consumer USA Holdings Inc. announced today in a press release the disclosure of errors within financial statements going back to 2013 that represent material weakness as well as financial gains for the company during this period. Ultimately, the company’s preliminary results predict the cumulative impact of the errors is an increase in total equity of 1%, as of March 31, 2016.
The company will restate disclosures for the full years 2013, 2014, and 2015, as well as the individual quarters for 2014, 2015 and the first quarter of 2016.
The press release states the errors as the following:
- The Company’s methodology for accreting dealer discounts, subvention payments from manufacturers and capitalized origination costs
- The Company’s lack of consideration of net discounts when estimating the allowance for credit losses
- The discount rate used in determining the impairment for loans accounted for as troubled debt restructurings (“TDRs”)
Although the company expects net gains of 1% to total equity, it has yet to report “material weaknesses in internal control over financial reporting,” which Santander says it is taking “remedial measures” to fix.
“We are entirely committed to achieving the highest standards of integrity within our financial reporting and control environment and believe that the actions we are announcing today are a further important step toward achieving that goal,” said Jason Kulas, president and CEO. “We would like to assure our customers and partners that the issues uncovered relate to non-cash items only, meaning they have no impact on our ability to continue delivering the high levels of service our customers rightly expect.”
Laurie Kight, SVP of communications at Santander, told Auto Finance News in a statement that today’s announcement reinforces Santander’s commitment to financial reporting and controls as well as strengthening a culture of compliance.
Separately, Santander released preliminary, unaudited Q2 results, which can not accurately be compared on a year-over-year basis until the updated filings are restated. Those preliminary results show $1.2 billion in net finance and other interest income as well as $5.4 billion in total originations.
“In line with prior quarters, we tend to experience ebbs and flows in our originations,” Kight told AFN. “In the second quarter we continued to see a decrease in our nonprime retail loan market share, indicating that we remain conservative relative to some other lenders. The amount of volume the market gives us is an output of our pricing strategy, which is based upon the most current data available. This ensures that we achieve our return threshold.”
The company reports the decision to restate its earlier forms was a joint decision between Santander’s board of directors alongside its audit committee as well as its current and former independent registered public accounting firms, respectively, PricewaterhouseCoopers LLP and Deloitte & Touche LLP. The errors were identified “after the Company’s previously disclosed transition of audit firms,” and the transition occurred because of “new corporate governance recommendations related to external auditor rotation,” Santander stated in the release.
“Since the identification of errors in our financial reporting, we have been completely focused on ensuring we correct everything as quickly and transparently as possible: engaging with our regulators, completing a rigorous review of our financial statements, and updating shareholders regularly,” Kulas said.
For more auto finance insights like this, register for the upcoming Auto Finance Summit, Oct. 5-7 at Bellagio Las Vegas. Visit www.AutoFinanceSummit.com for more information.Like This Post