Santander Keeps Credit Risk Conservative in First FCA Lease ABS

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Santander Consumer USA this week issued its first-ever lease securitization from the company’s Chrysler Capital division, and the credit risks look to be in line or slightly less than its peers in the captive space, according to an analysis by S&P Global.  

The pool is backed by 34,000 lease contracts valued at $872 million, which is notably smaller than comparable lease issuances from Ford Credit Co. and General Motors Financial Co. at $1.2 billion and $1.3 billion, respectively.  

Santander’s lease issuance has an average weighted Fico of 747, which — while much higher than its typical subprime profile outside of its Fiat Chrysler Automobiles partnership — is “slightly” lower than its peers, S&P noted. By comparison, those same 2017 Ford and GM securitization deals had average Ficos of 751 and 758, respectively.

However, the pool makes up for the lower average Fico by focusing on shorter loan terms — 64% of leases in Santander’s pool have an original loan term of three years or less. Conversely, 69% of leases in Ford’s 2017-B deal have original terms of over three years.

Santander’s lease portfolio overall has been steadily growing since the lender signed on as FCA’s preferred lender in 2013. Outstanding leases grew to $11.5 billion during the nine-month period ending in September, compared with $11.3 billion the same period the year prior, according to S&P.

Santander’s Chrysler Capital has emphasized a goal to originate more prime auto contracts for the OEM, especially since adding a flow agreement with the parent company Banco Santander earlier this year. However, net losses and delinquencies in the lender’s lease portfolio have also climbed during that time.

Borrowers 30 days or more past due grew to 1.42% of lease outstandings for the nine-month period compared with 1.17% the year prior. Likewise, losses made up 0.32% of total lease outstandings through September, up from 0.23% during the same period in 2016.

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