SA News • Tue, Nov. 25
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- SC investors have had a very rough year amidst a volatile industry environment.
- Despite this turmoil, the company has had several important positive developments.
- Government regulators have looked at the firm, but thus far declined to start any serious investigation or hit the company with significant penalties.
- SC’s earnings are obscured by provisions that are much higher than normalized losses. Overtime as actual losses come in and growth stabilizes, better results will surface.
- Volume growth can offset margin deterioration from cyclical headwinds in terms of losses and funding costs.
- This write up provides an analysis of the key drivers (volume growth and losses), and concludes that the shares currently trade at attractive prices.
Tue, Nov. 25, 4:47 PM
- Auto loan originations were $105B in Q3, according to the New York Fed's Household Debt and Credit report, with auto loan balances - now at $934B - up for the 14th consecutive quarter.
- The 90-day delinquency rate of 3.1% fell 20 basis points from Q2.
- Among those watching with interest are sizable auto lenders like Capital One (NYSE:COF), Santander Consumer (NYSE:SC), and Ally Financial (NYSE:ALLY).
Tue, Nov. 18, 2:15 PM
- Launching an investigation into possible predatory lending by local used-car dealers, the New York City Department of Consumer Affairs issues subpoenas to Santander Consumer USA (SC -4.8%) and Santander Consumer Funding 3 LLC.
- "DCA’s investigation is focused on indirect auto loans financed by lenders such as Santander and sold to consumers by NYC used car dealerships and will examine records of these loans over the past three years."
- An earlier post on SA suggested today's decline in Santander Consumer might be the result of lackluster presentations at the company's investor day today, but this probe is clearly the reason for the drop.
Tue, Nov. 18, 12:00 PM| Comment!
Wed, Nov. 5, 11:30 AM
- Santander Consumer (SC -1.8%) fell sharply post-earnings yesterday and is losing a bit more this morning after BofA and Wells Fargo pull the plug on their buy recommendations.
- At issue yesterday, and noted by both analyst teams in the downgrades, were poor credit trends - with provisions and net charge-offs rising smartly from a year ago.
- Santander Consumer CEO Thomas Dundon on the earnings call (transcript): "Compared to a more favorable lending environment in previous years, competition has driven margin compression. But we remain confident in our ability to originate loans with appropriate risk adjusted returns."
- Previously: Santander Consumer tumbles on higher provisions and charge-offs
Tue, Nov. 4, 11:02 AM
- Q3 net income of $191.4M or $0.54 per share vs. $111.2M and $0.32 one year ago.
- Total originations of $7.4B up 13% Y/Y. Originations include more than $3B of Chrysler retail loans originated for own portfolio.
- Finance receivables of $27.3B up 3% from Q2, up 17% from the start of the year.
- Net finance and other interest income of $1.1B up 24% Y/Y. Provisions of $770M vs. $598M a year ago. Net charge-off ratio of 7.9% up 140 bps from a year ago. Delinquency ratio of 4.1% up marginally from a year ago.
- "As the unsecured portfolio seasons and used car values decrease from recent highs, net charge-offs are increasing both quarter-over-quarter and year-over-year," says the company, with the CFO noting seasonality as making things look worse than they may actually be.
- BTIG's bullish Mark Palmer is pleased with the strong originations, but nevertheless mindful of the credit worries. He cuts his price target to $26 from $31.
- Previously: Santander Consumer misses by $0.06, beats on revenue
- SC -7.4%
Tue, Nov. 4, 6:55 AM| Comment!
Fri, Oct. 3, 5:36 PM
Thu, Sep. 18, 11:17 AM
- At issue was a $0.15 per share dividend paid in May by Santander Consumer USA (SC +0.1%) despite the fact that the capital plan submitted by Santander Holdings - the U.S. unit of Santander (SAN +1.2%) - had not been approved by the Fed.
- Santander quickly mitigated the violation by injecting $20.8M into its U.S. operation, and today agrees to strengthen its board oversight of management regarding any capital returns.
Thu, Sep. 18, 7:33 AM
- The natural tendency of bureaucracies to expand is in evidence as the Consumer Finance Protection Bureau turns its eye to nonbank auto lenders. The CFPB plan would scrutinize whether these loan providers are discriminating against minorities, using deceptive tactics to in selling loans, and following debt-collection laws.
- The finance divisions of major automakers are in the agency's sights, as are independent auto loan shops like Ally Financial (NYSE:ALLY), Santander Consumer (NYSE:SC), and Credit Acceptance Corporation (NASDAQ:CACC). Smaller and medium-sized players should expect relatively large increases in compliance costs.
- The CFPB will soon put the proposal out there for 60 days of public comment.
Fri, Sep. 5, 7:14 AM
- Springleaf Holdings (NYSE:LEAF) is started at Buy and $39 price target, with analyst John Hecht noting the recent sale of the company's legacy real estate portfolio as allowing significant upside for the stock (unfortunately, the shares are higher by about 30% since that deal was announced).
- Credit Acceptance Corp. (NASDAQ:CACC) is started at Hold and $134 price target, with Hecht finding the used-car lender's model an attractive one for long-term investors, but the current competitive environment as cooling growth prospects.
- Also rating Buys from Hecht are Santander Consumer USA (NYSE:SC) and JWGPT Holdings (NYSE:JGW).
Wed, Sep. 3, 11:08 AM| Comment!
Thu, Jul. 31, 7:22 AM| Comment!
Tue, Jul. 8, 1:14 PM
- Compass Point launches coverage on a couple of less-than-prime auto lenders, with Credit Acceptance Corp. (CACC -2.6%) started at Sell and Santander Consumer (SC -1.7%) started at Neutral, with price targets of $104 and $23, respectively.
- In one other financial sector coverage launch, Starwood Waypoint (SWAY +0.3%) is initiated with an Outperform at KBW.
Wed, Jun. 11, 12:47 PM
Thu, May. 29, 1:28 PM
- The Fed last week told Santander Consumer USA (SC -5.4%) it didn't object to its May dividend of $0.15 per share as long as Santander (SAN -0.6%) contributes at least $20.9M of capital to its U.S. holding company. Any further dividends will require Fed permission, and the company doesn't expect to submit a revised capital plan until January.
Mon, May. 5, 3:07 PM
- Apollo Investment (AINV +1.5%) is upgraded to Overweight at Barclays with a $9.00 PT.
- Credit Suisse upgrades BB&T (BBT +0.1%) to Outperform with $46.5 PT.
- Macerich (MAC -0.1%) is upgraded to Buy by Global Hunter Securities.
- KBW buys the dip in Och-Ziff Capital Management Group (OZM +1.7%), upgrading to Outperform.
- ISI upgrades Vornado Realty Trust (VNO) to a Neutral rating with $98.00 PT.
- Raymond James upgrades Virtus Investment Partners (VRTS +0.2%) to Outperform with $220.00 PT.
- Santander Consumer USA Holdings (SC +0.9%) gets a boost from Bank of America to Buy with $28.00 PT.
- Rafferty Capital upgrades Greenhill (GHL +3.9%) to Buy with $60.00 PT.
- Oaktree Capital Group (OAK -0.5%) is downgraded to Market Perform by both KBW and Morgan Stanley.
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SC vs. ETF Alternatives
Santander Consumer USA Holdings Inc is engaged in indirect origination of retail installment contracts principally through manufacturer-franchised dealers in connection with their sale of used and new automobiles and light-duty trucks to retail consumers.
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