Santander Consumer USA Holdings Is Being Hurt By Industry Overhangs
Alpha Gen Capital
Alpha Gen Capital
Santander And Its Down Hill Slide
Tue, Jun. 14, 1:01 PM
Tue, Jun. 14, 12:20 PM
- In conjunction with CFO Brian Doubles' appearance at a conference this morning, the company said it expects a 20-30 basis point increase in net charge off rates over the next year.
- BTIG's Mark Palmer notes Doubles says Synchrony (SYF -14.3%) continues to see the credit environment as "benign," though management anticipates "softening" in customers' ability to pay off balances. Palmer also says credit metrics currently are at unusually low (good) levels, and "normalization" should be expected at this point in the cycle.
- There's also a positive catalyst on the horizon in the CCAR results, at which Palmer expects the initiation of buybacks and a dividend.
- He reiterates his Buy rating, with $42 price target (60% upside) based off of 12.5x 2018 estimated EPS of $3.33.
- Discover (DFS -3.1%), Capital One (COF -6%), American Express (AXP -3.9%), OneMain Holdings (OMF -7.3%), Santander Consumer (SC -5.5%), Ally Financial (ALLY -2.9%)
Fri, Jun. 3, 1:00 PM
Thu, Jun. 2, 12:20 PM
- "Auto is clearly a little stretched, in my opinion," says JPMorgan (JPM -0.3%) CEO Jamie Dimon, speaking at a conference. "Someone is going to get hurt... we don't do much of that."
- Speaking at the same conference, U.S. Bancorp (USB -0.3%) CEO Richard Davis calls the auto loan market "overheated" thanks to pricing competition .“It’s a business you have to watch through the cycles, and right now it is probably at its least attractive. But in what could be a day, a month or a year, it could be very attractive.”
- Interested players: COF, SC, ALLY, CACC
Thu, May 12, 2:18 PM
- There's no hint of any sort of sustained bounce for LendingClub (LC -5.9%), down sharply again today, and off nearly 50% on the week.
- That doesn't necessarily make it cheap though, notes Bloomberg, as it's still trading for about 15x estimated 2017 earnings.
- "It started out as an Internet company, then it became a fintech company, and now it just looks like a specialty loan broker," says Portales Partners' William Ryan. "Even at $4 there's just too much risk here."
- Checking specialty finance peers like Santander Consumer (NYSE:SC), Synchrony Financial (NYSE:SYF), and OneMain Holdings (NYSE:OMF), LendingClub is more expensive based on enterprise value-to-EBITDA.
- On a more bullish note, Craig-Hallum Capital says in a takeover LC might be valued like a bond, with a bank interested in a platform creating an $11B loan portfolio with a 5.5% risk-adjusted yield. On that basis, you could make the case for a $12.28 per share valuation. In a distressed scenario, though, that calculation goes out the window.
- OnDeck Capital (ONDK -6.4%)
Wed, May 11, 10:07 AM
Wed, Apr. 27, 2:30 PM
- Santander Consumer (SC +8.4%) has previously been punished by investors when its algorithms told it to pull back from subprime auto originations, but today it's credit worries foremost on investors' minds, writes BTIG's Mark Palmer. To wit: The stock (prior to today) trading for just 5.3x forward earnings.
- Management's conservative approach to underwriting is being rewarded today, as investors focus on better-than-expected loan loss provisions, rather than a loss of market share.
- Core retail auto originations fell 15% Y/Y to $2.6B, but the allowance ratio held about steady at 12.4%, and provisions fell sequentially by $83M to $707M.
- Palmer maintains his Buy rating and $21 price target (about 75% upside).
- Previously: More on Santander Consumer's Q1 beat (April 27)
Wed, Apr. 27, 7:37 AM
- Q1 net finance and other interest income of $1.3B up 11% Y/Y. Finance receivables, loans, and leases up 2.6% to $33.7B.
- Total auto originations of $6.8B, with Chrysler Capital lease originations of $1.6B up 5%, Chrysler Capital retail originations of $2.5B up 1%. Core retail auto originations of $2.6B down 15%.
- Serviced for others portfolio of $14.2B up 27%.
- Allowance ratio of 12.4% up 10 basis points from last quarter. Provisions of $707M up from $675M a year ago.
- Conference call at 9 ET
- Previously: Santander Consumer beats by $0.03 (April 27)
- SC flat premarket
Wed, Apr. 27, 6:06 AM
Tue, Apr. 26, 5:30 PM
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Tue, Apr. 26, 9:24 AM
- Chatter SC)+Said+to+Attract+Takeover+Interest+-+Source/11532643.html" target="_blank">about buyout interest in Santander Consumer (SC) sent the stock shooting higher on Friday, but the shares quickly fell back to pre-rumor levels.
- The shares have been very active in the premarket today, hitting a high of $14.87, with the last trade at $13.27, up 11.5% from yesterday's close.
Tue, Apr. 26, 9:16 AM
Fri, Apr. 8, 8:27 AM
- Analysts expect Santander (NYSE:SAN) to become the only lender to fail the Fed's annual stress tests for three years running when results are released in late June.
- Source: Reuters
- Lenders submitted their capital plans this week.
- Risk controls and business structure remain a problem at its U.S. unit despite efforts at improvement. Santander Chairwoman Ana Botin promised early this year to either fix the operation or sell it within two years, but it's hard to see why anyone would buy when the operation serially can't meet Fed standards.
- In the meantime, Santander is unable to draw a dividend from the U.S. operation - money which might otherwise be invested in other businesses.
- The issue is not capital levels, but internal risk controls and the lack of integration of multiple U.S. activities under a single holding company.
- Santander Consumer (NYSE:SC) last month delayed its 10-K after needing to revise the way it accounts for some credit losses.
- Now read: Banco Santander Is A Good Quality Bank At A Bargain Price (P/E 8)
Fri, Apr. 8, 8:04 AM
- The U.S. consumer will be more resilient than feared, says the bank, so credit card stocks - down 8% YTD vs. a flat S&P 500, and now trading at about a 9x P/E level - make a compelling risk/reward play.
- Top picks: Discover (NYSE:DFS) and Synchrony Financial (NYSE:SYF). For DFS, investors are underestimating the company's ability to accelerate growth. For SYF, investors are too focused on credit concerns and weak U.S. retail sales. SYF, says Deutsche, has several advantages vs. peers in those areas.
- Already a Buy at Deutsche, Ally Financial (NYSE:ALLY) is due for a bounce, with concern over the TradeKing purchase overblown.
- American Express (NYSE:AXP) is still a Buy as the earnings growth outlook is so low now that the company can begin to beat estimates.
- Capital One (NYSE:COF) and Santander Consumer (NYSE:SC) are Holds.
- Now read: Synchrony Is Poised For Price Appreciation (March 16)
Thu, Apr. 7, 3:48 PM
- An increasing number of securitizations from smaller subprime auto lenders who tend to cater to weaker-credit borrowers has boosted net losses on subprime ABS over the past few years, says Moody's, which ominously notes this is happening even with favorable economic conditions.
- In echos of the MBS bust-up, several 2015 deals are experiencing high early losses.
- See also from one month ago: Shades of subprime flash warning for auto sales
- The two largest subprime auto ABS sponsors - AmeriCredit and Santander Drive (NYSE:SC) are losing market share to these smaller shops.
- Source: Bloomberg's Charles Williams
- Also monitoring: Credit Acceptance Corp. (NASDAQ:CACC).
Mon, Mar. 21, 12:43 PM
- There's been a lot of talk about an explosion in subprime lending, but 21.7% of all auto loans issued between Jan. and Nov. of last were subprime, says Equifax, right in the middle of the 21-22% range seen since 2012.
- As for delinquencies, the 1.15% rate in January of 2016 was flat from one year ago. Loan write-offs did rise to 22.5 basis points in January 2016 from 20.7 bps a year ago. At their peak in March 2009, write-offs hit 50 bps. Severe delinquencies of 0.48% this year were higher by two basis points. Severe delinquencies to subprime borrowers rose to 2.15% from 2.06%.
- Origingations, meanwhile, for the period from Jan-Nov 2015 rose 9.4% to 26.8M loans, and 12.4% to $554.8B from the same period a year earlier. They are the highest levels since Equifax began tracking the numbers in 2008.
- Source: Press Release
- Santander Consumer (SC +0.1%), Ally Financial (ALLY -0.3%), Credit Acceptance (CACC -3.5%)
- Previously: Subprime auto worry hits lenders (March 15)
Santander Consumer USA Holdings, Inc. operates as a holding company, which focuses on vehicle finance and unsecured consumer lending products. The company's primary business is the indirect origination of retail installment contracts principally through manufacturer franchised dealers in... More
Industry: Savings & Loans
Country: United States
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