Santander Consumer USA passing its stress test last month may have cleared the way for parent company Banco Santander SA to increase its percentage control of the auto lender, according to a published report.
The Spanish bank first proposed a deal to purchase a 9.7% stake in the U.S. subprime lender from co-founder Thomas G. Dundon in 2015, according to the report. A 9.7% stake in Santander Consumer (SC) is worth about $450 million today, but when the deal was first proposed, Banco Santander offered a price tag of $928 million. It’s unclear what the bank would actually pay, and SC passing the stress test may allow regulators to sign off on the deal.
The auto lender’s stock has lost nearly half its value since the company went public in 2014 as it dealt with a sting of regulatory actions — the latest being a $25.9 million consent order with the Reserve Banks of Boston and Delaware in March of this year.
Santander Consumer Chief Executive Jason Kulas expects and is preparing for state regulators to continue an increased enforcement mindset and said the company’s structure plays a role in that strategy.
“If you are a bank with an overriding bank charter who isn’t licensed in every state, you’ve had to deal with your own regulators,” he told Auto Finance News during an early June meeting. “If you are a non-bank consumer finance company not attached to a bank — like we are — then you’ve had to deal with the state regulators. The states care about the same things everyone else cares about, and their enforcement efforts, their auditing efforts, are better and more stringent than they have ever been. The companies who are successful long term are the ones who embrace this and deal with it at their business.”
Additionally, the subprime auto lender inked a $700 million flow agreement with Banco Santander at the end of March. SC intends to use that agreement to capture more prime loans at Chrysler Capital dealerships, said Rich Morrin, the company’s chief operating officer, during an analyst investor day event in February.
“The competition for prime and near-prime assets is intense,” Morrin said. “By partnering more closely with Banco Santander, we believe we’ve put ourselves into a much better position [for the future], relative to where we are today, which will allow us to try to grow those assets the right way.”Like This Post