Santander Consumer USA Holdings Inc. Reports First Quarter 2016 Results

DALLAS, April 27, 2016 /PRNewswire/ -- Santander Consumer USA Holdings Inc. (NYSE: SC) ("SC") today announced net income for first quarter 2016 of $201 million, or $0.56 per diluted common share, down 19 percent from first quarter 2015 net income of $246 million, or $0.69 per diluted common share. Adjusted net income for the first quarter 2016 is $213.4 million, or $0.59 per diluted common share excluding, an impairment on intangible assets1.

First Quarter 2016 Key Highlights (variances compared to first quarter 2015):

• Net finance and other interest income of $1.3 billion, up 11%
• Total auto originations of $6.8 billion
  • Chrysler Capital lease originations of $1.6 billion, up 5%
  • Chrysler Capital retail originations of $2.5 billion, up 1%
  • Core retail auto originations of $2.6 billion, down 15%
• Total asset sales of $1.7 billion
  • Including $869 million of personal installment loans
• Serviced for others portfolio of $14.2 billion, up 27%
• Average managed assets of $53.2 billion, up 19%
• Common equity tier 1 (CET1) ratio of 12.0%, up 190 basis points

"We remain focused on executing our strategy of expanding our vehicle finance platform, creating opportunities in our serviced for others platform, diversifying our funding sources and maintaining a strong capital position. Consistent with our decision to exit the personal lending business, we are pleased that we recently completed the sale of our personal installment loan portfolio," said Jason Kulas, President and Chief Executive Officer.

Mr. Kulas continued, "During the first quarter, we continued to monitor credit and maintain disciplined underwriting standards in a competitive environment, which led to a decline in market share in nonprime originations. As a well established players in the market, we have demonstrated strong and stable performance through cycles."

Finance receivables, loans and leases, net2, increased 2.6 percent, to $33.7 billion at March 31, 2016, from $32.9 billion at December 31, 2015. Net finance and other interest income increased 11 percent to $1.3 billion in the first quarter 2016 from $1.1 billion in the first quarter 2015, driven by 13 percent growth in the average portfolio. SC's average APR as of the end of the first quarter 2016 for retail installment contracts held for investment was 16.7 percent, down from 16.8 percent as of the end of the fourth quarter 2015 and up from 16.6 percent as of the end of the first quarter 2015.

The allowance ratio3 increased to 12.4 percent as of March 31, 2016, from 12.3 percent as of December 31, 2015 primarily driven by the increase in qualitative reserves for the population of loans with limited bureau attributes. Provision for credit losses increased to $707 million in the first quarter 2016, from $675 million in the first quarter 2015.

1 For a reconciliation from GAAP to this non-GAAP measure, see Reconciliation of Non-GAAP Measures in Table 8 of this release. 2 Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles. 3 Excludes purchased receivables portfolio and finance receivables held for sale.

In the first quarter 2016, SC recorded net investment losses of $73 million, compared to investment gains of $21 million in the first quarter 2015. The current period losses were primarily driven by $68 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, including $101 million in customer default activity offset by a $33 million benefit from change in market discount. In the first quarter 2015, personal lending activity was not included in net investment gains (losses) as the portfolio was held for investment at that time.

SC's individually acquired retail installment contracts (RIC) net charge-off ratio and delinquency ratio increased to 8.2 percent and 3.1 percent, respectively, for the first quarter 2016 from 6.1 percent and 2.9 percent, respectively, for the first quarter 2015. The increases are driven by mix shift, slower portfolio growth than the prior year first quarter, lower recovery rates and less benefit from recent bankruptcy sales compared to the first quarter 2015.

During the quarter, SC incurred $310 million of operating expenses, up 26 percent from $245 million in the first quarter 2015. Adjusted for a $20 million impairment on intangible assets expense,4 operating expenses were $290 million, up 18 percent, as expected, which is in line with average managed asset portfolio growth of 19 percent. SC produced a 2.3 percent expense ratio for the quarter, or 2.2 percent (adjusted for an impairment of intangible assets4), in line with 2.2 percent expense ratio in the same period last year.

"In the first quarter, we continued to grow our average managed asset portfolio, to $53.2 billion. Managing expenses is a primary focus as we continue to grow our managed assets portfolio and invest in the platform, as evidenced by our competitive expense ratio. SC also continued to demonstrate consistent access to the capital markets, executing two securitizations totaling $1.6 billion in bonds issued and sold," said Izzy Dawood, Chief Financial Officer.

In line with SC's strategy to leverage its scalable servicing platform and increase servicing fee income, SC executed asset sales of $860 million during the first quarter through existing loan sale programs under which it retains servicing. Servicing fee income totaled $44.5 million in the first quarter 2016, up 79 percent from $24.8 million in the first quarter 2015, primarily due to the increase in the portfolio of loans and leases serviced for others to $14.2 billion as of March 31, 2016, up from $11.2 billion as of March 31, 2015.

4 For a reconciliation from GAAP to this non-GAAP measure, see Reconciliation of Non-GAAP Measures in Table 8 of this release.

Conference Call Information

SC management will host a conference call and webcast to discuss the first quarter results and other general matters at 9 a.m. Eastern Time on Wednesday, April 27, 2016. The conference call will be accessible by dialing 888-417-8462 (U.S. domestic), or 719-325-2337 (international), conference ID 4286748. Please dial in 10 minutes prior to the start of the call. The conference call will also be accessible via live audio webcast through the Investor Relations section of the corporate website at http://investors.santanderconsumerusa.com. Choose "Events" and select the information pertaining to the Q1 2016 Earnings Call. Additionally there will be several slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download and install any necessary software.

For those unable to listen to the live broadcast, a replay will be available on the company's website or by dialing 877-870-5176 (U.S. domestic), or 858-384-5517 (international), conference ID 4286748, approximately two hours after the event. The dial-in replay will be available for two weeks after the conference call, and the webcast replay will be available through April 27, 2017. An investor presentation will also be available by visiting the Investor Relations page of SC's website at http://investors.santanderconsumerusa.com.

Non-GAAP Disclosure

This press release includes certain non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). SC believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and SC's marketplace performance. This additional information is not meant to be considered in isolation or as a substitute for the amounts prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions. A reconciliation of these non-GAAP measures to the comparable GAAP measure is shown in Table 8 of this release.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimates," "plans," "projects," "continuing," "ongoing," "expects," "intends," and similar words or phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements are not guarantees of future performance and involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond our control. For additional discussion of these risks, refer to the section entitled "Risk Factors" and elsewhere in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q filed by us with the SEC. Among the factors that could cause our financial performance to differ materially from that suggested by the forward-looking statements are: (a) we operate in a highly regulated industry and continually changing federal, state, and local laws and regulations could materially adversely affect our business; (b) our ability to remediate any material weaknesses in internal controls over financial reporting completely and in a timely manner; (c) adverse economic conditions in the United States and worldwide may negatively impact our results; (d) our business could suffer if our access to funding is reduced; (e) we face significant risks implementing our growth strategy, some of which are outside our control; (f) we may incur unexpected costs and delays in connection with exiting our personal lending business; (g) our agreement with FCA US LLC may not result in currently anticipated levels of growth and is subject to certain performance conditions that could result in termination of the agreement; (h) our business could suffer if we are unsuccessful in developing and maintaining relationships with automobile dealerships; (i) our financial condition, liquidity, and results of operations depend on the credit performance of our loans; (j) loss of our key management or other personnel, or an inability to attract such management and personnel, could negatively impact our business; (k) we are subject to certain regulations, including oversight by the Office of the Comptroller of the Currency, the CFPB, the European Central Bank, and the Federal Reserve, whose oversight and regulation may limit certain of our activities, including the timing and amount of dividends and other limitations on our business; and (l) future changes in our relationship with Santander could adversely affect our operations.  If one or more of the factors affecting our forward-looking information and statements proves incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Therefore, we caution not to place undue reliance on any forward-looking information or statements. The effect of these factors is difficult to predict. Factors other than these also could adversely affect our results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. New factors emerge from time to time, and management cannot assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements only speak as of the date of this document, and we undertake no obligation to update any forward-looking information or statements, whether written or oral, to reflect any change, except as required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

About Santander Consumer USA Holdings Inc.

Santander Consumer USA Holdings Inc. (NYSE: SC) ("SC") is a full-service, technology-driven consumer finance company focused on vehicle finance, third-party servicing and delivering superior service to our more than 2.7 million customers across the full credit spectrum. The company, which began originating retail installment contracts in 1997, has a managed assets portfolio of more than $53 billion (as of March 31, 2016), and is headquartered in Dallas. (www.santanderconsumerusa.com)

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Santander Consumer USA Holdings Inc.