SC - Earnings call transcript Q1 2018 | Santander Consumer USA Holdings Inc.

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Operator

Good morning, and welcome to the Santander Consumer USA Holdings First Quarter 2018 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Evan Black, Vice President of Investor Relations. Evan, the floor is yours.

Evan Black

Good morning, everyone, and thanks for joining the call today.

On the call, we have Scott Powell, President and Chief Executive Officer; and JC, Chief Financial Officer.

as SC’s certain statements. future today, as made begin for projections performance we you’re statements aware, such Before are forward-looking results different materially could projected. Actual from those be the to info SC update no obligation presented has on call. the

of For investors. further cause to call, measures filings. in please believe these differ, measures our SEC provide that A speakers to information public certain on will XXXX. these that issued GAAP non-GAAP our financial results U.S. refer Also is concerning earnings information the factors reconciliation today could today’s to may XX, useful April to reference we included release

Relations For you of well are review webcast, there as a Investor few as a those presentation website. on slides investor to listening user-controlled full the the on

the Powell. Scott turn I’ll Scott? to over call Now

Scott Powell

morning I’ll for Great. quarter first to the quarter. detailed before joining Thanks everybody. by first out Thanks, reviewing Juan for Evan. more over start it our the Good of Carlos I turn highlights review a call.

So in let’s the start on presentation. Slide X,

You’ll the for quarter a Santander was see really first Consumer. that strong quarter

operations our demonstrate team, our management risk management. in strengthening results continued success Our and

Our which totaled $XXX per $X.XX income was net share. million,

was on the quarter declaring X.X% XXXX. to Our average first to also $X.XX X.X% a in And in we’re per of May. return of dividend share assets paid compared be

were of originations So channels Total compared a we originations first billion, really all of had and up looking XX%. XXXX. across our originations, in to at strong which quarter total in quarter is the $X.X

XX%. our penetration XX% in XXXX. Chrysler up quarter leases at the billion to originations were XX%, importantly, versus loans X%, $X.X Chrysler up came billion first core billion in improved XX% of and Our up rate $X.X $X.X And

focused we’ve seasonality, and reflect optimizing but our on management improving call. do talked our been they We’ve originations that also Our and in risk pricing the about credit – last which We’ve do us. and which dealers initiatives reflect for the it make process do to service. reducing by it streamlining business done make customer easier and time, funding to easier dealer this with the some underwriting

in originations that we’ve in really been no all, about ROA has buybacks. So first the in been we credit good change significant our all no feel has there change booked and the there quarter, our in quality target of

you’ll to remain delinquency the quarter Turning credit first that to last the ratios metrics, quarter. see flat of

that take Let’s down see X% the at are you’ll they year-on-year. a that delinquent, look dollars are

story. our were Now, overall down that’s X% balances but good a year-over-year also still pretty

points last XX.X% auction-plus recovery quarter XXX basis first the Our rate versus to improved of year.

our first basis more points is of expected. Our net last quarter by fourth the the year by we than verus to million and were improved charge-off lower which XX X.X% quarter, ratio $XXX significantly TDR versus balances

detail, Juan portion that. call the more will this cover then questions I’m So, that of Carlos and some Q&A have during a we’ll about talk to sure in

things strength of about we these U.S. we led with of used reserve the U.S. previously in and balances the changed, really had expect less all in hasn’t We lower the than car anticipated. And in non-prime. some respect prices really our outlook So XXXX. X% the more good in prime prices, economy feel consumer we release still both and than feel good about decrease to

year. of the pilot full originate Santander And rollout quarter the in of quarter, the to Santander that continue U.S. we expect service rollout to results the to and floor third the $X.X Santander from to launch of grew that also quarter full X% fourth is Santander the Group. benefit at in – Banco reflect prime Bank in which SBNA our program business quarter. billion that see of and loans. plan leverage the first Consumer first up You’ll this The the

Group The for both agreement and since four with are a things, our billion. both positive with the the quarter for transaction prime with also did we’ve $X.X XXXX. the in the of business. the and for flow pilot others our And Group business flow the also Group these done We transactions service

a for we will the increase prime demonstrates and this loan auto business. for our And capability. after quarter third-party we’ll our to us, completed for billion which for a opportunities balance capitalize portfolio addition, new In for ability service it on to our conversion others $X first ended, service others the by do look more

two to we Juan update with AutoGravity. quarter, reached reached just I the digital our buying first the to car capabilities. nationwide. is want call make want goals – officer similar; available January. on initiatives brief in these of AutoFi a before This offers with an to to we And the an finance very customers Carlos. we process consumer by Okay, agreement preferences aligning And we turn agreement strategy finance our the In are more over the our our to digitally addition simplify to

detailed more So the I’ll Carlos, presentation. Juan it to walkthrough with that, turn for of a over

Juan Carlos

everyone. good and Scott Thanks, morning

market Consumer Despite for originations be economic to very some historical that total auto Slide and influenced recent GDP healthy X a supportive business. of robust stable of Turning the remained for credit and environment gradual state indicators our healthy. high, is of continue These range. Unemployment levels is indicative the new and are of key low metrics growth is sales microcosmic downward creation job with vehicles. overall confidence and strong line The our performance. to stable and indicators are economy. remains in trend,

and our rates our are compared and Slide last year. influence quarter auction-plus a recovery to And the had key Scott this performance. severity can few QX credit On factors that there as improved performance, we’ve X, recovery good mentioned, loss auction-only very

the including quarter performance ended QX improved up our end of driven at year, the vehicle by auction-only rate last from almost recovery of vans, XX.X% XX.X% SUVs. all and Our across trucks at types

our quarter. and total X, increased the rates core and Slide to to same recovery up continue same in originations quarter include during greater retail loan the be XX% were the originations QX the a We Chrysler turn increased in auction-plus last to quarter strong XX.X% sales including originations auto from prior insurance which than quarter Total bankruptcy loan insurance, period XX% Our year. year. for increasing compared the leasing growth compared XX.X% proceeds, XXX efficiency both less to and year the X% last FICO

non-prime targeting to remains a maintaining risk originations the lease. profile increase for and strategy volume return presence appropriate Santander by in Our the leveraging prime programs strong

results. this said, management, and credit fine Scott pricing the work strong streamline continue and our originations to risk and to experience. our our we’re underwriting by As dealer and improve was quarter for customer a encouraged tune We’ll process

penetration from XX% in to our the prior for up rates X, Slide to that year report quarter XX% we’re Turning pleased was the quarterly quarter. average FCA

We’re servicing expect third-party loans, leases, platform optimize floor from full continuing to our and lending plan service. and across

million quarter for moving $X.X to assets portfolio Servicing prime service will the $XX increase drive in prior quarter you in totaled increased see conversion origination. continuing April. billion to also Turning but expect others QX. the quarter forward this additional to by transaction balance year completed QX next with an we increase in we sequentially And this platform in to Santander from that Slide third-party flow the another our compared fee executed for as X, we income

the losses to for finance to Slide receivables Let’s lower start for of Interest sale quarter by income review million the This held million market in balances. stabilizing in average compared a a patterns. QX which driven during X% quarter in credit $XXX $XXX to expense increased in or for $XX a loans This cost decreased credit partially combination decreased on of million portfolio. to the discount, is the year driven seasonal and recovery year rates interest was $XX million charge-offs, by related $XXX up consistent million million million $XX higher Total for included $XX year. from in move million XXXX. customer the our other and with had of performance to and Provision lower by to $XXX last QX X% performance benefit the by quarter of provision higher quarter. million of finance lower market primarily $XXX derivatives, income net year-over-year year. expense lending period, comprised rates. in with partially prior decrease personal primarily offset X quarter rate balances, in from adjustments and decreased QX encouraging the offset We’ve Interest due versus market the favorable last

Turning QX for XXXX well losses to and Slide XXXX our that XX. through loss XXXX We’ll outperform review to net still quarter as Continuing believe the decreased gross vintage year. delinquency to gross QX performance. and with net between somewhere and vintage fall $XX terms as quarter compared net XX Slide This is and likely our vintage gross to will year. to in XX-plus the slide on basis. to the XXXX the of in consistent vintages last a vintages charge-off placed quarter, XXXX XXXX Gross rates vintage We continues from update losses. flat last million XX. were The compared XX in and dollars XXXX last

charge-off ratio QX However, approximately or the by decreased last also points gross a over net year, ratio quarter, $X.X $XX quarter dollars XX X% increased the QX this to average the denominator basis, year. On rates, in the XX.X% versus the due from of basis last decreasing charge-off net million down in period. billion

X.X% Our points rate XX year. is of net last ratio QX from down basis charge-off

supported we’re seeing recoveries. by and charge-off credit by delinquency ratio, evidenced flat in our ratios As lower net performance stabilization improved continued

hurricane related of have In in benefits addition, QX some and year and the experienced QX. we begun last as of QX have to reverse predicted, in

$XX loss million XX lower charge-offs improving $XXX Slide RICs Stabilizing decreased credit for rates. and figures performance quarter for balances. dollars. recovery million individually was primarily review in quarter the in the attributable acquired to to Net to Turning RIC which to the

decrease higher therefore, net result average briefly in over due address of the downs in of then to million losses period, fewer $XX offset balances was is better to by other category higher million me in RIC lower decrease balance and work. primarily $XX is the rates the driven year gross lower million. prior recovery by losses lower million the rates decrease million for the $XX The charge-off the of to bankruptcy quarter. for components a due the than $XX more opportunity $XX a losses. And compared write in loans same Let

last and quarter, quarter, on the of end $XX for million XX.X% of now QX Now provisions liquidations XX. which were new end ratio over by XX allowance represents versus decrease at payoffs reserves million and migration. the decreasing million the to same loans which down These offset due points go $XX At due due TDR to in to adjustments billion others, originations from Slide quarter to basis $X.X the allowance book. the than XXXX, million total allowance components I’ll increases $XXX of a the The charge-offs. and totaled credit performance due decrease to an the our in loss to increased million turning reserve to and of more the period. our includes and allowance $XXX $XX attention our favorable

discuss in now QX to TDRs last provided the in $X.X update Investor to consecutive Slide during more billion Let’s $XXX year. in quarter. decreased TDR million second detail. XX the sequential the Day balances decline. This turn similar to in of from prior billion is February our XXXX $X We

vintage Now older that back XXXX. of this as modified prior vintages, you can sheet, to dating balance on to see, continue In there lines perform. remain our are demonstrating portion considerable TDRs

of still end of balance decreasing, In is this of TDR XXXX the TDRs QX. addition, the the of the contribution while of XX% as represents vintage

a off remain As a will pays charges once it it unless loan a reminder, TDR the or becomes off. TDR,

QX to Turning Expense attributable same and management totaled year. ratio flat the XX. period and this X% the year expenses prior quarter severance of X.X% legal decrease decrease for totaled the of discipline This versus last $XXX last primarily a quarter. to quarter in expense was million versus year. expenses Operating Slide

million. Turning remains more liquidity committed strong funding XX, total of to $XX our funding and Slide with position than

SRT of in maturities new QX, quarter second and and As to have our we cost the quarter, continues [indiscernible] our $X.X Subsequent revolving finding ABS end, billion completed and facilities the completed consistent DRIVE Also million also access funds also for to capital note, business. demonstrate structure transactions. core optimize and markets, in transactions including lease deep we of sold assets. quarter, been to $X.X the transaction. lease warehouse we to we billion SRIP offered expanding and of ABS we Chrysler securitization, non-prime for our our to the which continue $X of And the improve renewed in

Finally, turning Slide XX. to

CETX ratio the for XX.X%. Our quarter is

to Federal we to are upcoming are declaring look results updating the second for submitted Scott As you released. $X.XX Reserve, for quarter. dividend per plan capital planning cash a mentioned, this Earlier it’s once updated month, the we the of forward and SHUSA capital cycle share the

to unless for relative million to interest the we by performance driven provide finance noted higher loan Despite In seasonally to lending. guidance, have The be $XX include My and second and $XX of comments be the attributable credit on will lease recent in X% to net otherwise the we’ll of will personal down QX is second quarter. impact terms strong expected expense guidance primarily X%, balances. other quarter. to million, income, or

to We be expect lower be flat, to lower, patterns. attributable line seasonally expenses are expected total expense million, reposition income to disciplined and with million expense flat $XX management. seasonal around to in $XX Operating

back to Q&A, turn call begin to the like we I’d over Before to Scott.

Scott Powell

feels include good we’ve originations. is good I’d in focused quarter. also and Consumer pricing up, to that our in seen strengthening like Corporate to off terms as about off in they is things stable-to-improving second our in to per also our us. a to Juan start that Yes, efforts around that us, million program giving Responsibility we’ve credit well the communities. to and all trends, strong dealer of the of year, pretty going targeted $X the as new in see Santander experience credit launching good improve of at deal announce end charitable when Social It’s team the a to our to with business. the so I’d Thanks, improvements which with initiatives say, management paying been on risk And so we’re optimizing Carlos. sum

get going financial in commitment part opportunities social non-profits Santander’s States. We’re and economic through volunteer our employees mobility inclusion. of corporate And that with this to engaged is promote broader the responsibility United

open to operator. up Over like we’d to it you, questions. that, with to So

Operator

[Operator John Instructions] We’ll go first Hecht, to Jefferies.

John Hecht

any guess, during would be of much first Good advising data much. question about just they I’m a now, the in interpretation morning, be is, be. little quarter, of higher charge-offs bit that is of stronger that as trust the ABS very those structure to loans wondering other in should out there anything, characteristic trust ABS maybe came actually thinking to in guys. there we aren’t just our point the at Thanks way time? I different believe the or a as any is right are than is generally that than that thinking that this

Juan Carlos

Yes. Thanks.

the is of you if of of fact product. data, percentage the have in the which, of a one a I the know, drivers think, as key there, non-prime DRIVE growing discrepancy, you will, in is that trust you type deeper

So that might be overall swaying the charge-off.

just we it’s the the balance think sheet. I So data what of matter mix versus trust on have in a actually

John Hecht

migration quarter? there that. be is on point, that variable, some is every sequential versus think this fair And migration your Should guess, this performance XXXX appreciate relatively TDR at reason I – depending this well, helpful. quarter the with or be coming would of we then it JC to should down, second the where to That’s down seen XXXX. we’ve Okay, TDR two question, as the quarters

Juan Carlos

that the to seasonal on higher and across balances downs QX. QX TDR TDRs. note, very performance. to had, the we gradually overall, we thing increase down. be in board No, we as credit we performance, back tends to QX in the One also look good at we’ve that if very pay expect had see came discussed, some And just of also still a trends

QX. Some those of have reversed into

reflective trend were with So otherwise, probably, of in But the that the during respect it have was general a little I okay? say than the to would larger all down. QX QX magnitude but would trend delta bit they gradually is direction been

Scott Powell

part smaller portfolio. XXXX, of and that as the Especially smaller becomes

if equal is, road rest as fair year. for the unchanged, influence offset to that, increase road or the the the obviously, will we year the down being Now of a things that’s TDRs is, a is which That originations all have strong piece. But well. so the down that of and

John Hecht

Great. I guys. Thanks appreciate all that color.

Juan Carlos

Thank you.

Operator

[Operator Instructions] with Stephens. Caintic to We’ll go Vincent next

Vincent Caintic

guys. much very Thanks morning. Good Hey,

rate what so year. to expect of rates, last the time? what could of if wondering you a and to execution target some you’ve we higher First quarter the that over that should your order on sort describe done penetration and move to continue penetration improvement and that Chrysler improve maybe I’m in from levels last

Scott Powell

the across question. a of general for our improvement as I’ve channels, and for in pricing describing, And is Thanks kind all our optimizing Yes. it what Chrysler. with been risk especially,

a So selling peak team they Chrysler we’re how closely taking opportunities and to pricing finding do work with sure making We promotions around very on drive for and have much with more our approach business improvement. granular for in the them the seasons. closely how to collaborating risk we’re those

any it. ROA I are real not isn’t targets. to not buybacks magic as changing there’s we we’re there expanding – So said, our no credit And our

more the being skills, us, improving And do easier then, working the really speed originating So the dealers to this right business, Chrysler way business at right to is issues it with our focused focused been on funding. of including that them in very price. get on the them making understanding for

of which off pay kind with whole it’s forward those to to the fourth move now So of things, in starting to starting quarter, and a things. series we’ll pay – off are continue

very to guide to hard So for I at it. today, we I focused are going on are can’t you work would much to different but – we ways we’re where than look anything on it increase it. and

Vincent Caintic

from – out. particularly rate is Great. how interest guess, And side, That’s with maybe have that Chrysler more seen rising I have been helpful. engagement you plays I’m relatively, Thank you. and – environment you the maybe pushing interested that

Scott Powell

really important that is initiatives, the them, the – a rhythm them. models are focuses fair in it’s side. – team different for around think Yes, say leasing with important And lot got I Carlos into are be pretty and ourselves on a engagement more joined into Morrin with things Chrysler that I there Rich September lending like challenge. rates Chrysler. in to September which I rising then and them, are, a yes, both have would to to Juan I it’s And good joined since role, on going we a the said, and know, their and we’ve you moved

used see a a I on financing that production so side. do as also the don’t lot We of impediment car

Vincent Caintic

you. Great. Okay. Thank

Operator

with next question Shane Rick from comes Our JPMorgan.

Rick Shane

guys. Hey, for my question. Thanks taking

cars used platform, over what’s guys Given in certain the the up with were more anything to market. Are showing strategy, car seeing we very seen Rideshare Americans miles that are changes about of you the there am going about way or as that any unique more you your Rideshare? as disrupt you’re access time that use you’re related to cars. concerned we’ve I on altering their curious auction-plus have if sort data

Juan Carlos

our say vehicles, if performance the we that I mileage we portfolio. by on that at those But take the much remember also, lower Rideshare that auctions, high get can’t almost nature do but reposition. seen of of vehicles of and have – stable, the have the the do across balances related we pretty time all we to to has been improved our

customers time recovery whole, sustaining longer. that vehicles those as – investors are rates. in improvement So terms in sorry, a for But a an it’s bit

Rick Shane

Got mileage? with it. higher [indiscernible]

Juan Carlos

them okay. also they but to trended a lower No, balance, have again,

recovery is areas. rate. and focused Rideshare we our focused portfolio that to all an give on So in it’s is on improved Florida, thought on probably Rideshare, California, your and Texas Also bulk metropolitan question note of the if to some all, important more

Scott Powell

gone of do haven’t be we It and look kind to that. think, it that at way. for through us really a taken I interesting Yes, might

look at and go the can a it take certainly You data way. that pause

It XXXX, I to used gone We true decline the I’d big cars offset right? used say our cars. that driver, than clearly haven’t demand a more up, for in and XXXX seen mean, from has is

go point. question. that an But dig detailed at to data the it’s interesting look it. So We’ll we’ll on

haven’t it so though. far We really seen

Rick Shane

Great. Thank Okay. you guys.

Scott Powell

Yes. Thank you.

Operator

with We’ll go Crédit Moshe Orenbuch next to Suisse.

Moshe Orenbuch

then bit in given it’s some box. things make said credit expanding mean, Great. we’ve core Maybe some guys are little environment? the originations been to good and competitive about who increase able the I sub-prime who pretty have are competitors talk saying really you without talked Can to to that Thanks. a you tough loans. the your

you what so you’re So about successful. a maybe talk and little you’ve seeing been how

Scott Powell

fragmented really Well. Moshe, it’s a marketplace.

little hard it’s ins a of the read to the So competitors. outs and

remains the of know pulling back competitive but a are and guys very are some the very, You and space. out big brands in that name – it

at do any to across aren’t do people prices so, what and I just movers for look And other there been it in mean, different feels pricing as competitive compare cells. the market one. as always big we But is or it’s because the in there there’s one but way out in going this going coming that the are but who so to are space on people other or it’s out in many hard us. and say players

Moshe Orenbuch

originations level kind it downs like sheet the seeing But we’re to that see likely for Thanks. that the Okay. the does of feel pay balance XXXX. given growth you’re and of

given a I – of just you give? a from additional provisioning, maybe the kind know QX, guidance interest what any of so, And kind and net longer-term income of implications through color are for talk basis, you kind slightly standpoint you’ve but can could on

Juan Carlos

Yes, in good the quarter. growth, quickly. are good of assets credit But these a start in and year We that about down you’re the sheet we fairly are terms balance very second we’ve originations that started of right, where had terms remember feel and performance. pay to

hope So to advantage easy. replacing adjusted of book that returns. take right to We at will the us back risk not give opportunities market continue the the is the

you replacing. tell of in terms So can that’s what I

this In we feel terms we QX at out, in the what quarter good a feel time. for good about of seen point about we’ve provisions, we again, guide but – in

Moshe Orenbuch

you much. Thank very

Operator

go We’ll to with Morgan next Graseck Betsy Stanley.

Betsy Graseck

on year that I’m working there. regulars satisfy do the submission was around I in. end. SHUSA mentioned complete there morning. the A just still left from on you for of requirements your one you Hi, And just wondering questions, this regulatory put to are is – anything to was anything good submission couple wondering that there’s going to just questions anything the if

Scott Powell

out are to with There’s compliance there related working on. we agreement one Reserve. the regulatory Federal public issues Well, there are

for you the question, any agreement It’s that to have horizon is to out the that anything we’re capital working address. do plan that your certainly So a initiatives. on regulatory of not impediment, doesn’t but work it’s directly it’s on to with use there, – have started it exist something issue doesn’t where big that our –

Juan Carlos

the… what that’s And

Betsy Graseck

Sorry, go ahead.

Juan Carlos

add was terms capital to said to seeing in us, I like going capital in we plan look to different that quarter we SHUSA’s capital the of capital soon. were forward plan, all actions available and the last submission alternatives those results come

Betsy Graseck

there’s Okay. of requiring they And capital is is, question that the some Europe Santander other obviously change not you holding in to count They’re a that you. count the in rule already. for

not the so, that whether you question is, not. And or matters to or

that read you how parent’s parent. change rule wondering for your Just ECB

Juan Carlos

It doesn’t here anything SHUSA how we the our of at locally that treat or ratios capital kind, impact level. or

our planning level. it capital capital impacted transformation the or foreign So at hasn’t

Betsy Graseck

Okay.

the So reason product then type only really on you know But the there of about other had underwriting. the improvement going question you’re just is conversation on strong recoveries, recovery some there? else anything on is for that recoveries quarter obviously earlier the that or I this

Juan Carlos

the broad in trend metal been No, non-metal. QX, vehicles. we’ve as pretty in well seen much a think, it’s across we I Yes, a general and spectrum of performance, think, both pretty as entire

Betsy Graseck

thanks. Okay,

Operator

to next go Research. Geoffrey Autonomous We’ll Elliott with

Geoffrey Elliott

feels in change Kind getting discussion on way, any you exactly out? about Santander everybody changed that a question. Good Santander Maybe the morning the capital you Consumer of to bought just does like thinking bit. and it thanks change for explain Can my that, minorities what there putting then, might the change mentioned. first taking has

Juan Carlos

changed earlier shape or I to locally way, really you – believe should No, Group process or form can’t had had their hasn’t earnings operations And this, today. at said, so here review I I our material those. they call all. any nor related like planning look, it in capital some and

Geoffrey Elliott

Okay, you. thank

Operator

go to next Wasserstrom Eric with UBS. We’ll

Eric Wasserstrom

we a for How about, incremental my you constructive. about TDR expense provision do for the to How Juan very we is obviously, the, think that Thank follow-up from you’ve the on think going signaled, a Carlos, TDRs moment. trend just question. given like, forward? do Great. which contribution discussion taking

Juan Carlos

coverage would expect. higher a carry TDRs you Yes. as ratio,

So the primarily, a it’s it good will of performance we’ve but function be – primarily been had balance.

previous As earlier calls. we and today discussed in

those than terms I QX that did the for of trend we those alluded the So And we ebbs be of key of year was to the But move flows, okay? down right. rest faster to in year. discussed gradually earlier, pay TDRs and particularly earlier, the aside, we – expect trends The relatively down, hurricane-related for There balance should as will the and trend large expected. the the larger we than rest expected. remain that

Eric Wasserstrom

one balance I sheet strong from of Great, really of guidance, in should for expectation may if think the piece originations, the we understand And to growth size sheet. I interest the spread or help just thank of a here. Or that. about changes balance what Can in given guess, you you the core my changes of how is, follow-up on me the net around question income. that’s extent function

Juan Carlos

able side, certain luck, that will. to our has with to funds that if continue rates our of the headwind we some The It’s we’ve right. hedging the on continues With still, been question. in of you customers, But competitive underwriting. able on a do asked increased look, mentioned to said, cost headwind to rates our higher Yes, this as year-on-year. to That the earlier it’s are environment, be to a have but been NIM, you spread. impact. higher should Scott I’m glad right, because – some have to I along for pass able a we be us, moderate

to strong And go we’ve it as in should ahead, through So we of will look the that see that had flow start given in quarters. and be top balances. line originations, the primarily function a coming we the

Eric Wasserstrom

you thank much. very Great,

Operator

question next Sandler O’Neill. Chris Donat from Our with comes

Chris Donat

the the in dynamics Hi, the in of related Wanted demand actual there in growth DRIVE securitization for rapid originations two of a relative the SDART moving issue one good securitizations. understand the the and why securitizations, just the or is what balances? Thanks taking platform that on which reflective or to in platforms to shrinkage question. part mix is balances morning. directions for my are those on Is revisit the I’m opposite to your strategy investor the trying securitization.

Juan Carlos

tends No, that we remember some we remember for it’s been have, I tend But quite active reflective – hasn’t like to to DRIVE time. DRIVE in be terms that the of of said credit.

a some or be. normalized now represents little deeper, there. any it used it so catch sequence strategy represents of But going more intent now DRIVE up So share platform. it of of a to what particular there’s is the the And just more bigger towards

Chris Donat

just – follow then there related my that, that like one-time up, clear sort XX.X% right? strong be there’s proceeds in just recovery And just or unusual number? insurance to auction-plus, nothing rate to anything of It’s from or for Okay. on a

Juan Carlos

Okay.

Chris Donat

Okay.

Just checking.

Operator

go next Kevin Jaffray. with Piper Barker to We’ll

Kevin Barker

you it XX% taking practices now quarter? the your questions. this recovery in servicing my for your TDRs to In changes and this like borrowers impacted your impacted for Has at expectations that of versus with least count Thank seen for we’ve regards has going forward, payment XX%. rates expectation

Juan Carlos

[indiscernible]

Scott Powell

always complete, talking platforms. two past, I just a be XX% it’s XX%. think we’re considered changed it been instead of on the aligning to so always the about payment – are Chrysler Kevin, SC was order XX%, has to been you for side the in In

Juan Carlos

They now. are both XX%

Scott Powell

Correct.

Juan Carlos

Yes.

the question So was?

Kevin Barker

TDRs and that had an expectations your impact for rates? has Do on recovery

Juan Carlos

No. no. the It’s Not two. meaningfully, just aligning

Kevin Barker

Cecil. then one their Okay. big policy due mentioned changes competitors to accounting And of your to

your Cecil the methodology? reserving your to expectations going impact forward, and you’re are what how and Going address

Juan Carlos

Yes, that. had of saw of away. we’re clarity at moment some more what was the we still intended. a terms impact. in bit we early guidance this give terms to – What we Look, also the saw little is too It’s time in not

change in think on Don’t at all for capital. stand-alone to time, across in NPR, for excess and company And company. accounting, or specifically, But treatment give SHUSA otherwise. the might’ve any principles Cecil of You we not intended what reserves did forget, too is a that smaller, it also to considering align We it’s I this you estimate. are an accounting point seen early is Santander. the type still the

considering this So are it’s not at that something time. we

Kevin Barker

you. Thank

Operator

SIG. next Micenko go We’ll to Jack with

Jack Micenko

about Hey, the good ask morning Wanted bit guys. allowance. to a

and top the came side the the or if on basis TDR of balance ratio pretty and positive what more was points. to allowance think Obviously, by thinking significantly a we TDR had all non-TDR is originations $XX just the on think that? you the but adjustment know those the you’re to of line was driven you million pronounced down that you of about Here that ratio about XXX something really new kind TDR do quarter-to-quarter. normal XX:XX reconcile been the I trying how

Juan Carlos

overall in balance, was credit and were the think, I key performance factors. balance No, it

the And many we’ve we look frankly, ahead, continued there about originations the strong think and and factors. as strong as to other impact variables Now those allowance. have in quarter mentioned future our before, all we that in are originations for expectations

credit key drivers balances performance and the this is So in quarter.

Jack Micenko

Okay.

of So quarter one-third. this think ratio an is allowance the TDR more about

Juan Carlos

Yes.

Jack Micenko

is XX that Tier business there? Okay. said or XX And Has talk then, about of XX X, way. XX months, can your on down the in broad right over do Scott, in past, you XX I what sort – next you strokes thoughts the the on the think you think come that

Scott Powell

that I quite didn’t follow one.

Evan Black

what our for XX expectations capital, and X that? Tier The

Juan Carlos

the capital about that that amount analysis, targets of capital our at a plan. being this is XX.X%. with Originally, talked incorporate is And – as what into we we We running submitted are point. we our our excess capital significant

Scott Powell

JC, cycle first that Because approach this did right? would capital into said in and what time last be going one, would testing and time Yes, we pass. with stress a expected to take we was was the we the different, – different than a we sorry, previous

very And step quarters. to for and taken the different have these capital approach And the this improved we capital I time. we so, tell more past we submitted did Call when plan think direction for plan just four would that distributions. got normalized for it right in approach about manage capital conservative a way take you, towards a or the

Jack Micenko

helpful, I appreciate you. thank that color. That’s very

Scott Powell

You bet.

Jack Micenko

helpful. you. That’s Thank

Operator

question JMP take We’ll next our Scharf from with Securities. David

David Scharf

of All answered follow-ups. Good right. have morning. a questions couple been of just but Most my maybe

answer selling part becoming spread there you comment and auction-plus, of or recoveries? one-timers are those can between planning generally like is ahead auction you somebody on a and no. whether I more more not But on Are regarding First, it charge-offs. know any asked prominent sounds were looking whether the the

Juan Carlos

basis we our there. to strategy so intend on regular don’t we haven’t We’ve – a that we No, do set…

Scott Powell

way our is basis Opportunistic the strategy. but I’d describe change in no it

David Scharf

a those there know Because few losses. of buyers great. are only Okay, I secured

be it. follow-up right are provision no the the credit. ballpark few thinking deals I got are a rate allowance to for us we is with next like just there mean, So about ought that, JC, guidance? that on the XX.X% flow to share anything or And then you implied quarters? able what supports the ending

Juan Carlos

And calculation. there’s on know guide as our I ratio. factors the range goes a that you quarter well, of the for into don’t you number give a because We

We are so. intend to adequately served remain and

So than to it’s give hard that. you more

David Scharf

you. Thank Perfect.

Operator

Mark with to We’ll go next Barclays. DeVries

Mark DeVries

you. a few signs forward what Thanks. questions recoveries? vehicle kind on recoveries more your the of under the A seen going for contraction as supply kind had increase result impact and recoveries in what and destruction of, expectations hurricane on both you for going to trend? And, an demand that Have Yes. of are

Juan Carlos

We talked saw the was saw of quarter. of about We wanted to and sure recoveries we that We the it out way. QX. last make some normalization support in the the some and

was we and car a Last line part, forward, terms it’s industry, of just in most think our paid prices. looking X%. than for about in less we the outlook going that drop or And with talked used for quarter, expectation overall more our less the So through. of we’re

although, terms used drop But some prices. from remains, players. overall we’ve still expectations deal incorporating in generally seen that think in we’re a of I those industry moderation car

Scott Powell

the And seen pickup trucks we’ve Because to and a certainly, used those especially, right? for related it demand helped in pickup vehicles. trucks industrywide seen the for for cars, sales demand our trucks,

there’s being if more than a that’s know don’t periods. hurricane I related So previous lot but sold certainly trucks

Juan Carlos

saw we normalizing saw breakthrough. QX, sort that we of length in it’s a we think The in and QX,

Mark DeVries

there Okay, you that’s the provide us process update can then, portfolio? for any the on that helpful. sales And Bluestem is

Juan Carlos

nothing report. new No, to

Bluestem as to relationship partners well. continue and at optimize our that to delighted work We’re with

Mark DeVries

Thank you. got it. Okay,

Operator

Steven Kwok KBW. to next with go We’ll

Steven Kwok

taking for Thanks Great. my questions.

Just a of should follow weighted the we up life around Cecil, the can you comment average portfolio? around how what about think –

Juan Carlos

we portfolio entire life the So the two bit go weighted little by thumb less the our that for average is portfolio. a of rule or more over of

Steven Kwok

installment And retail loans? the what auto just on

Juan Carlos

thing. same the Roughly

Steven Kwok

okay. consumer evolving? the reform you have seen any on That’s been then, impacts tax And that’s roughly, and around how

Juan Carlos

were we more early to to say. too tell. benefit. looking dollars still have still Folks but in early for their Yes, generally, Definitely, signs a pockets it’s too but

Steven Kwok

Great. Thanks questions. for my taking

Juan Carlos

But to macro job to be to for us. market, right, the look key key at – things That the creation. us, it to critical unless bank, is where we the continues employment points in the put

Scott Powell

it’s see Yes, for we in see demand and there us, cars, not certainly folks do hurt to believe that but starting tax the that their right. to into going for is hard to impact paychecks of translated

non-prime driver. big for is In season core addition, refund business, and this – a season season a of big our tax is tax part that

Not tends non-prime core so in the Chrysler our business. rest for much decline So the volume the for of part to the of year. so

it’s see. We’re reading it’ll we so those think TVs too just help us, hard to

Steven Kwok

it. Got questions. my taking Thanks for

Operator

We’ll question Fotheringham with James Montreal. next take from our Bank of

James Fotheringham

buyback? scope know and capital, include wondering the in derecognition or may. on to I’m a more Fed? about SC the general secondly, I of after about any know before minorities you. to dividends submission if you SC wanted Thanks. submitted of to you did Thank plan did to it – the ECB’s question addition to if majorities buy the And Two CETX request CCAR your Banco capital I

Scott Powell

like of We’ve on Group certainly too. question. I’m Executive discussions, good some Santander are These Committee had the

capital to certainly nothing conversations we a Alvarez significant how time. it be change there’s we Jose of on Have confidential guard you it our change about the pretty Group said as when and is stuck just capital CEO there’s information, here ratios the the going tell our impact minority happening. plan relates our that’s if can’t Group like all, the but that in to is all Antonio of first this morning, So

Juan Carlos

And impact called here. that’s rate on capital it’s an planning

Scott Powell

Not exactly. at all,

James Fotheringham

Thank you. Thanks, guys.

Operator

Our with Point. next Compass question comes from Michael Tarkan

Michael Tarkan

impact my treatment of Most year have do On DEFAST asked sub-prime we Thanks. questions of should one expect? have follow-up. any I this been auto proper that but from

Juan Carlos

that. talked about We

earnings think, call one – the that I question on last call. during one

assumptions, the remember right own sold stress all at think stress we You we last we – at from the might Fed’s looking assumptions looking we year than higher way. and having have the are

are We than them. always higher

So hood. results. be interesting it they’ve on will updated We Those the see see don’t never what run. detail of exactly is to We it. on their under lot how be know to continue the a

or which adequate it how conservative. analysis, we So said like we think gone about time, last impacted hasn’t we is and have

Michael Tarkan

Thank you. got. That’s I all

Operator

Cyganovich from Citi. final our Arren with question take We’ll

Arren Cyganovich

relative how if Thanks. I’ve requests to what Can on SHUSA dynamics you question Thanks, limitations capital got you is your for there’s plan approved remind your the impacts kind and capital whatsoever another any the and process just capital. through me that get to there for them? hit of

Juan Carlos

to Yes, other capital commented this size. holding plan that we submission before. every have of I Federal SHUSA on The think consolidated company is capital Reserve like plan the just bank

and plan for then then submitted is the to submission SHUSA to is make Federal Reserve. that here Our analyzed capital SHUSA to consolidated locally

XX.X% sense also to SC plan. the SC. consolidated at SHUSA any actions company the said, analysis, is make a capital And like we our view but have on for reflection then consolidated us on So of the at at what here we capital capital view

Arren Cyganovich

you. Thank Great.

Operator

call Scott final queue, to questions no turn with for the over in comments. I’ll further And now Powell

Scott Powell

company. joining call everyone, We Great, the today. the thanks. questions. Thanks, your Appreciate interest appreciate our for in

team for As Investor always, Relations be around will questions. follow-up the

So you you, soon. that see feel to free reach team. Thank out to guys,

Juan Carlos

Thank you.

Operator

your does We Ladies conclude this for you and gentlemen, conference. today’s participation. thank

You may now disconnect.

Santander Consumer USA (SC) 24 Apr 182018 Q1 Earnings call transcript