Santander Consumer USA Holdings Is Being Hurt By Industry Overhangs
Alpha Gen Capital
Alpha Gen Capital
Santander And Its Down Hill Slide
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)
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
Tue, Mar. 15, 10:40 AM
- A weekend WSJ story about the 2007-like blowup of a subprime auto loan securitization continues to take its toll on Santander Consumer (NYSE:SC), down 7.8% today and 11.9% over the last two session.
- Ally Financial (NYSE:ALLY) is down 2.3% since Monday morning.
- Not necessarily auto-related, but certainly tied to the boom in less than prime lending, two-day losses for OneMain Holdings (NYSE:OMF) 8.1%, OnDeck Capital (NYSE:ONDK) 3.3%, Lending Club (NYSE:LC) 5.5%.
- Credit Acceptance Corp (NASDAQ:CACC) is down 5.2%.
Fri, Jan. 29, 3:41 PM
- Now renamed OneMain Holdings with new symbol (OMF +1%), the former Springleaf Holdings is lower by 37.4% for the month and about 50% since last summer.
- Santander Consumer (SC -0.4%) continues its post-earnings decline despite 2%+ gains in the major averages today. It's off 35% for the month and nearly 60% over the last six months. At issue for Santander Consumer and thus for OneMain were losses in the personal lending portfolio, along with upticks in net charge-offs and loss provisions.
Wed, Jan. 27, 12:49 PM
Wed, Jan. 27, 10:56 AM
- It was the hope that new CEO Jason Kulas "kitchen-sinked" the company's Q3, but the residue clearly leaked into Q4, writes BTIG's Mark Palmer.
- In Q3, the company decided to exit personal lending and categorize the portfolio as held for sale, but this quarter's lower of cost or market adjustments lead to the big earnings miss.
- Acknowledging an uptick in net charge-offs and loss provisions, Palmer nevertheless reiterates his Buy rating and $21 price target, saying the reality of modest credit degradation is more benign than the bears fear. Plus, the stock's lost nearly half of its value since the summer, suggesting any concern is more than priced in.
- SC -14.25% to $11.49
- Previously: More on Santander Consumer's Q4 (Jan. 27)
- Previously: Santander Consumer EPS of $0.19 (Jan. 27)
Wed, Jan. 27, 9:22 AM
Mon, Jan. 25, 12:35 PM
- It's going to take time for Santander Consumer (SC -1.4%) to overcome concerns over a negative turn in the credit cycle combined with increased competition in its core business, says BTIG's Mark Palmer, cutting his price target on the Buy-rated stock to $21 from $30. That $21 is based on 8x his estimated 2016 EPS of $2.67.
- Q4 results are due on Wednesday, and Palmer would like to hear management's take on the state of competition in subprime auto lending as well as any progress on the sale of the company's personal lending assets. There's also the CCAR which SC's holding company has failed twice. How might the company fare this year?
Oct. 29, 2015, 12:20 PM
- In the first big shift since Jason Kulas took over the CEO job from Tom Dundon in July, Santander Consumer (SC -13.1%) is exiting the personal lending space to focus on its core auto-lending business.
- Forget the headline earnings beat, says BTIG's Mark Palmer. Kulas somewhat "kitchen-sinked" the quarter not just by the personal lending exit, but also by changing the company's loan-loss provision model, and announcing an expected increase in the cost of debt next year. The loan-loss tweak made earnings look better in Q3, but they should look worse this quarter.
- Palmer reiterates his Buy rating and $30 price target (now more than 50% above the current level).
- Previously: More on Santander Consumer's Q3 beat (Oct. 29)
- Previously: Santander Consumer beats by $0.10, beats on revenue (Oct. 29)
Aug. 11, 2015, 12:29 PM
- The CFPB last month notified the DOJ of instances where it found Santander Consumer (SC -3.2%) overcharged "protected groups" of consumers on auto loans, according to the company's quarterly report.
- Last month the CFPB and DOJ extracted $24M from the lending operation of Honda over higher rates it charged to certain groups. In February, Santander agreed to pay $9.35M to make a DOJ investigation over repossession of cars of U.S. military members go away, and the company is also under SEC and DOJ investigation over other auto lending and securitization practices.
Jul. 30, 2015, 9:48 AM
- Q2 net income of $285.5M or $0.79 per share vs. $289.2M and $0.81 in Q1, $246.5M and $0.69 one year ago.
- Total originations of $7.6B vs. $7.4B in Q1, $6.7B a year ago. $2.7B in Chrysler Capital retail loans, $1.4B in Chrysler leases for own portfolio.
- Finance receivables, loans and leases, net up 9% YTD to $31.5B.
- Provisions for credit losses of $739M vs. $606M in Q1, $589M a year ago. Allowance ratio of 12.4% up 90 basis points during quarter, up 100 basis points Y/Y. "Credit trends are stable and in line with seasonality, the market is competitive, but rationally competitive, and performance is in line or slightly better than management expectations."
- Net charge-off ratio slips to 5.3% from 6.7% in Q1, and 5.8% a year ago.
- Previously: Santander Consumer beats by $0.05, beats on revenue (July 30)
- SC -4%
Jul. 6, 2015, 9:55 AM
- BTIG's Mark Palmer calls the departure of Thomas Dundon surprising, but "apparently benign," noting the company asserts the resignation is not related to performance or accounting issues.
- Dundon is replaced by Jason Kulas, who has ben president since 2033 and CFO since 2007.
- Dundon, says Palmer, is selling his 9.7% stake in Santander Consumer (SC -5.4%) to parent Banco Santander for $928M, effectively becoming a liquid billionaire at age 43. He was the founder of what was then Drive Financial Services 20 years ago, and then sold a majority stake to Santander in 2006.
- Palmer reiterates his Buy rating and $28 price target.
Feb. 3, 2015, 8:36 AM
- Q4 net income of $247M or $0.69 per share vs. $191.4M and $0.54 one year ago. ROE of 29.1% vs. 17.3%. ROA of 3.1% vs. 1.8%.
- Total originations of $6.1B vs. $5.8B one year ago. Full-year originations up 33% Y/Y.
- Finance receivables, loans and leases, net up 23% Y/Y to $28.8B.
- Credit loss provisions fell to $560M in Q4 from $770M in Q3 and $629M a year ago. The allowance for loan loss ratio falls to 11.5% from 12.1% a quarter earlier. This boosted EPS by $0.11 per share. "Based on the trends we are seeing in the market as well as in our portfolio, we remain confident in the adequacy of our coverage," says the CFO.
- Conference call at 9 ET
- Previously: Santander Consumer beats by $0.13, revenue in-line (Feb. 3)
- SC +2.2% premarket
Dec. 9, 2014, 12:45 PM
Dec. 9, 2014, 10:23 AM
- Banco Santander (SAN -2%) is considering a buyout of Santander Consumer USA (SC +9.6%) reports Bloomberg. The spike in SC triggered a circuit breaker, and the shares are just now trading again.
- To review: Santander Consumer USA was taken public at the start of this year, but Banco Santander got put in the penalty box by the Fed for accepting a dividend from the U.S. operation in the spring. Any future payouts will first require Fed permission.
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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