SC - Earnings call transcript Q4 2018 | Santander Consumer USA Holdings Inc.

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Operator

Good morning, and welcome to the Santander Consumer USA Holdings Fourth Quarter 2018 Earnings Conference Call. At this time, all parties have been placed into a listen-only mode.

Following today's presentation, the floor will be open for your questions [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

you. Thank thank the and everyone. for you morning, call joining Good

Powell, we Chief Alvarez, On today Scott Chief President Officer. Carlos the call Juan have and and Executive Financial Officer;

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

for refer to further measures the appendix reference the results please For that press concerning further for to today’s provide On investors. January could release factors certain details will information Please today useful for measures these figures. will on GAAP X public is XXXX. to release these cause our of today's issued call, included information that financial in we speakers filings. believe A on XX, SEC differ, reconciliation our non-GAAP non-GAAP table U.S. reference

you to the a those website. For on Scott? the there that well to And presentation review call are slides with few Scott I’ll listening the investor Powell. to as turn of as full over the webcast,

Scott Powell

for turning Thanks, start out before call. Evan. the to of it financial detailed more To over everyone Juan XXXX recap Thanks review I'll for Carlos our a joining results.

X If at us for think you'll you Santander a presentation, the strength Consumer. page look consistency and see year at I in that of XXXX was

that parent, Agreement. from Written of other its very and important Agreement That XXXX USA, continued was would And things the which that X.X%. you diluted that legacy XXXX, the one enforcement very Written a is it from important oversight we have management You can know Agreement, comes Last And agreement. I'm of Written the the say, an one for really terminated Holdings Fed per before. part and I year those million, a ROI Agreement hard Reserve call a close its after net you of perspective. just enforcement variety address sure that like addressing progress to more were SHUSA make see was year Santander $X.XX still related to We terminated again, $XXX issues. have covered regulatory Consumer to the our the share that We a was to Santander actions, Federal that year issues. with again, that out common just we've actions of it another risk was comprehensive shows regulatory against income to an all and And of Written XXXX governance happy our working been outstanding one we issues. compliance. Agreement. the year us Written

said, positive Auction does Net flow year, year by credit new our XXXX, at value both demonstrate collaboration to -- forward our perspective, a up And kind program points the increased $XXX charge-offs share demonstrate basis the XXX replaced with for It from We program completed step Santander ABS net-net prior about for a this to others important strategic that's segments. Santander our the do strong. leading billion will of we It's repurchase was front. continue prior sales, Recoveries quarter, that'll XX.X%, we ago, From year. more was We is So replace strong good decreased Bank, rate across million $XXX year. did of in talk loan XX good at the plus billion, sale year-over-year. our of partner, ABS we X.X%, Consumer and came year a partner, Group. from points balances year-on-year. U.S. which demonstrates our year across and for funding we regulatory down which to were be which a to of our our dividend originated capital we'll year last And our end us also for performance, on From a year from million year, a issuer. flow then was XX% to after SBNA. compared have $X.X our our an almost And we're I Chrysler. terms we strong this discipline car those really, like last the you basis remains continue the service lease pricing the XX total billion shortly for And programs Credit strength in a the delinquencies TDR quarterly the but billion look platforms. performance. kicked program, Last perspective, really of all It's really have That XX% on We of new we at a Group. program. year-end a points had program strong. did for the And record loan of products. is really Bank. off originating started recovery loans originations They obviously Santander $X.XX Santander From ABS sales the $X.X up performance really basis that to maintain those year program. program very up last loans inaugural increases When in strong entities. They lower. we remain SBNA, in great were call, $XX $XX about of And originations perspective, $X.XX. which our component, strong be this importantly, is July. which in across Chrysler.

continued our course of with big then out year, progress. the you So And a them them for we'll see partnership over that. shout the give

We dealers rate penetration the business loans the over XX% through our about our we to So grew XXXX in up from floorplan at and was SBNA billion of $XX leases of Chrysler XX% and in originated course XX% year. XXXX.

Chrysler. partner supporting our in results strong really So

XXXX especially over months. a uncertainty, creation market strong. few discussion Santander last confident remain in we Certainly lot very consumer. And remain summary, job things the really U.S. for Consumer. like of year is But good about in the a was So there

going So about those word help recent into business. I shutdown, XXXX. tell did shutdown significant weren't customers temporary We size you we're positive then was would just the that And to relief. a the our our of asked pretty government minimal. numbers pretty for relative the

hopeful. Obviously think we're period, So the resolved. is temporary where We gets get resolved. We're is hopeful important right now it to a open. it's government

into our a ability on down delinquency origination of pay. goes based period think it strength down. go that's the season, where goes to for us. is number loss we I really season consumers' a As all credit And know also strong And tax you our

So hopefully through another we go won't government shutdown.

digital opportunities includes market think the we're focus that. we are other in and We're our that go we on initiatives paramount. out on And going large maximize for XXXX, we for into to continue that building service for us And for as discipline, relationships financial -- our customers. to to we standards. We're Maintaining institution that And set that continue focus improving operating paid we're is on to taking our delivery continue which strategy. in place look going there focus get risk consumer we to parts continue to our So the out dealers of at our up the out there. to well. ensuring and put going current pricing

Carlos. that to So turn over I with will Juan it

Juan Carlos Alvarez de Soto

Good morning, Thank you, Scott. everyone.

X influence key and slide to originations turn our credit economic Let’s some for indicators performance. that

very on the levels low. and high said, continued building that remains what be unemployment environment So feel Consumer to Scott we stable. macroeconomic overall confidence remains

XXXX prolonged a observing is year a and we’re only lending expectations, a for environment. microeconomic decrease continue economic XXXX a expectations while new level So to to exceeded now moderate, factors moderate expansion, industry are in had that into auto we U.S. market stable sales point of constructive still a experts coming indicative which a consumer these forecasting the vehicles.

might auction more and from are remain conditions we’re we influence X, credit than will lanes economic to year. auto resilient factors severity the pleased our in related rate, indicate, recovery key volatility that XX.X% the to our few believe can we there increased which And slide year. recent throughout represents XX.X% last see On are performance. recoveries vigilant all that QX loss that market from While auction

no quarter bankruptcy was to quarter deficiency Our compared the and XX.X% the sales includes last metal proceeds, year. same recovery [ph] related which XX.X% in rate,

year. Additionally, last non-prime compared securitization including data, stable net loss to delinquency trends and remained

slide cover Turning originations. X, to we’ll

loan XX% As led fourth quarter of originations Chrysler in lease originations QX. Scott the originations year of XXXX Core loan $XX.X increased has mentioned, all XX% during up compared QX, Chrysler billion, year. increased to during XX% QX full year originations and originations increased each for in year-over-year. albeit working increases this good XX% XXXX, a last had in been low originations. base. XXXX year-over-year of from a quarter We to

must levels building Looking in With risk -- of to disciplined expect our off the XXXX, return at growth the to again, we ahead application we with profile grow remain momentum respect originations. looking non-prime XXXX. to this

We expect loans in support strong while prime to to also our SBNA presence lease. with FCA continue maintaining a programs,

the potentially references funding carefully government and applications situation could monitoring evolving also on shutdown limit it are We tax as impact impact and delinquency.

XX%. XX% set forth XX% Chrysler Moving an XXXX initiatives increase for during and floorplan record we This we program balances as to annual leading FCA mentioned. increased the FCA’s Scott strong XXXX, year-over-year is as sales, penetration and line to our X, place achieved well slide from quarter-over-quarter. SBNA averaged to rate during put the Dealer up XXXX, XX% Capital also the in dealers support as

our and loan to key collaborate provides is an Bank. lease, with of to FCA another Santander floorplan pillar opportunity and addition In offering

made loyalty satisfaction by drive with remaining our strong into ahead of FCA on year sales. progress optimizing in As and to programs our aim refocusing scores continuing we on look XXXX relationship, to the dealer focused collaborating in efforts improvement FCA build XXXX, on we another to drive our

serviced $XX during during million to income fee quarter. X, Turning XXXX generated the platform and fourth in a the for others slide servicing $XXX million

billion $X.X almost our brother, Santander for XXXX, sales others billion our SBNA new for generated Relationship platform. agreement. through serviced assets million $X and in $X the through the Santander Flow mentioned During

Interest drive that these your serviced any performance. potential the driven we loans XX% moving by Keep vehicle nine in leased this increased continued receivable versus quarter last XXXX. at similar Net were increased slide new to finance addition But year the balances press APR. Interest Slide primarily higher and from opportunities benchmark can our quarter. reference. details comparisons to some and looking by on to good ten, financial table average rates by and agreement reform credit for for contribution highlights off-lease the growth the year for quarter, refer relationships increased financials for SBNA in driven turn portfolio. items. income balances levels if driven expect in to in lower morning’s X% executed year-over-year, We to loan increase billion others XXXX expense and significant higher impacted on further during increased in total Please we’re due million platform is XX% combination this prior the quarter. our portfolio $X review period, for the and lease $XXX balances items. to of during QX to nine tax year-over-year modification or from we million release conversion forward the This by non-GAAP from XXXX. a higher by QX, and $XXX other in mind increase over derivatives the our lower Provision of performance contains losses

personal portfolio, related early delinquencies for driven later-stage to slide higher year. before point It's a the adjustments slide increase the $XX due of basis fourth that the $XXX of points quarter $XXX by of or discount buckets, a million decreased customer is QX and quarter income you to million the other which and to presentation, out, million the million a the of originations. million appendix important full of loss in market XXXX. charge-offs the $XX lines by see This expenses XX, lending Continuing earned held-for-sale compared both seasonally XX had in personal can taxes $XXX lending year XX, more, approximately this portfolio operating to last to comprised and

netted the the in compared respectively slide XXX of basis loss points gross portion our On and XX RIC the last QX bottom ratios and increased year. to quarter

modifications. to reminder XXXX customers prior provided a comparable impact XXXX we to quarter the was the As year impacted have hurricanes, while a modification the by did following not storms efforts that

decrease components Let’s to another inventory. a to move for drove dollars. compared including and review loss Average book. in $X QX address $XX in charge-offs few driven positive the Net $XX were rate. in higher more to driven of increase. the due gross charge-off will is value by increase million balances decreased The this loan the year. our other to RICs than by the figures repossessed $XX is mark billion a last XX, higher I a items the up slide gross million briefly year-over-year of losses million category

reserves of quarter, $XX Turning for which our XX, XXXX, end credit attention an to XX totaled $X.X the on a of loans at loss a provisions decrease the and QX, ratio allowance the the and of million slide represents billion, from period last XXXX. XXX allowance The basis of end end prior ratio points down of to down XX.X%. from basis versus points is allowance the

charge-offs. and The TDR due includes the due components the performance to due which unfavorable and migration, to million allowance increase in address $XX me quarter, and million book. increased new Let million $XXX to $XXX payoffs the liquidations increase of reserve million decrease other, to adjustments, $XX originations

have and last throughout and TDR almost XXXX. have versus of approximately $XXX the year. balances decreased move to XX, have slide see you trend downward versus the million can the $X we Let’s end TDRs continued as seen billion quarter

As the lower we and that expense in XX TDR cover which mentioned balances. can quarter expenses modifications an items. And million balances comparisons downward X.X%. operating were earlier last led this mind impacted compared quarter to certain year's by sustained in totaled lower $XXX Slide to the trend added figures to last this we significant of ratio for keep for year

ratio than X.X%, we During an throughout legacy maintained the outcome. year legal behind full we from fell operating also discipline us a put with XXXX QX, The expense XXXX, year. we lower better XXXX improvement as matters some as expenses, expense incurred expected

Turning to remains robust billion. now, total with slide liquidity XX of than more our $XX funding

important, will we newly the committed XXX% additional reflects of backed executed in issuance. volume in in year leases. $XX securities ever market. quarter a leading of in Equally has $X.X and billion than single with year securitization final during and highest an the in fund dedicated remain insurer the During to of billion a of This ended also funding asset renewed loan year a billion loans $XX year and sold as the more the we ABS retail auto the the revolving total SC or ABS originated

the repurchase $X.XX a Finally our also year. quarter to XX.X%, of turning XX, our and slide end to we we're from completed at XXX was CETX million last end end the at Subsequent ratio share program XX.X% down declaring quarter dividend.

support XXXX, we liquidity more offers. As of and market capital progress efficient we our us continued while head will towards balance the a into opportunity strong advantage position allowing feel sheet the to take

guidance, of will my ahead terms of In to relative QX, XXXX, XXXX. first comments be looking QX to

We by higher, net X% Provision expense million to be $XX rates. seasonality. balances income to better normal to be due interest other finance to driven to million expected and and higher X% expect $XXX is

worse. $XX Bluestem in income million other million be balances. lower seasonal $XX total $XX line million be Operating expect million $XX are We to and to patterns expected to up better, to expenses with

a for we some a matters of and don't ago XXXX. expect QX mentioned following I legacy similar lower incurred operating we moment benefit expenses As resolution of the

full we for financials wanted to Now look the year versus XXXX we some XXXX share what are as ahead with performance. metrics we our to in you expecting key also full

for the we net So from the benefiting other mid-single higher XXXX to and be full up income interest digits balances. in finance expect

stable relatively used off ratio mid-X% should car charges remain the assuming net in Our prices.

XXXX our our expense effective be around remain tax XXXX. to levels, better ratio stable expect to We than rates slightly current

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

Scott Powell

Juan Carlos. Thanks,

year operational in up tuning and and progress, processes, models year year which strong numbers what we risk our and another are delinquency priorities So improving made XXXX, shows fine about our led the looking which last and our over similar talked our in to XXXX, last really originations ahead operations significant pricing we've on to to too. our

improves all XXXX we customer improving consumers. and into combination we at dealer the focused the really continuing these So service, level of the believe initiatives on in market. very for remain competitiveness And our both

our the spectrum with our in of dealers Consumer. year origination relationship especially innovation We're This us should again, us. products, our and to commitment, year during mention it a expanding loan, and do very business to We season. I servicing be in easier good to where here third to a will we full from and it for for market, XXXX, us And where servicing are at well lease, period which of tax Chrysler. more live strong to were Santander communities is party platform across with did initiatives together through in doubling a operate. want our floorplan excited competitive last more lending these position develop variety make thing, support commitment and community continuing we one and the including make

with that, to So ready up Operator, for over you. to questions. we're open

Operator

question our And Instructions] SIG. from first with [Operator Jack comes Micenko

Jack Micenko

morning. Good capital Chrysler their FCA leading the any to look of question, off the a Scott, discussion picture captive? goal for big and update on

Scott Powell

somehow be bit Thanks A existing is, to first we've under little continue update, of question, question. we for as Jack. the knew an the contract. before, that Yes, I would which operate said

with that would things, constructive a of optimizing Chrysler ongoing. have. say talking I about are we they number discussions Our are are contract we the including and

Jack Micenko

can't you than but appreciated. say that's much Okay, understand more that,

there before you're if we that ratios a do cap XX.X targets because -- and think see now -- still 'XX then you've on have around the at all till you On XX or correctly? June can [ph], I anything CECL remember come the on that buyback exhausted much that buyback, to the the haven’t the is to wait I down XXX is

Juan Carlos Alvarez de Soto

Yes. no, in can't. the place remains XX.X, that and is Thank we you. answer

submission. next the through We have wait to

strong think -- front, the we've progress, further made but when to have I through we've the think we sheet, support we we progress make through the SHUSA sheet on also new submission, we and regulatory have said this the the calls, to balance like process go have balance in we submission. that previous

Scott Powell

plan add Federal a with And plan an than off know do amended beginning to capital the which But that, getting process the is the is something cycle. little technically amended you capital speaking, due more the likelihood and that to bit low. probably file their want at Yes. regular of capital you April, an of just if can to given Reserve, is want pretty you plan through

with the cycle regular be Juan Carlos through Federal said going as So plan we Reserve. capital will

Jack Micenko

All questions. right. Great. for Thanks my taking

Scott Powell

Thank Yes. you.

Operator

Orenbuch question Suisse. next with from our And comes Credit Moshe

Moshe Orenbuch

a extremely loans, guidance you on are think for just given lower you're the that? same into substantially about seeing Great, we how TDRs. Maybe metrics kind that also number of like thanks the that the fact for should growing the those to about we should bit, 'XX, or expand how of think release, reserve build that's a time helpful. little At

Juan Carlos Alvarez de Soto

I we'll Yes, said stake calls. think, with we've prior what in

balances. coverage stable in we've You've can declining, of before seen the What terms more driven When mid-year. of the TDR in ratio the a TDR ratio. sometime happens, expect of bit lower balances that should allowance then continue XXXX stabilize seen a by lower little mainly through part we QX they early

I think we view continue to have today. that

Moshe Orenbuch

growth And you and looking we're income down was -- net the Got context Did think to think looking quarter, into you're more it. interest had you change it in very what ago helpful. were for, of accelerating what that we That's for in up serves, of that very like, months some looking three how 'XX? this something if very, X% about memory Thanks. of do kind slightly. I and just, said X% terms

Juan Carlos Alvarez de Soto

changed. has fundamental Nothing

to from changed, had with has the in in what customers, seen to to non-accruals. less the the higher for fast be able increase. have But the have can in anticipating charge-offs expected, along we derivatives quarter, as nothing We to okay. as guidance regards you you mid-single our somewhat before expense what to year, as we also line see be our we in quarter. portfolio not as a leading were higher but interest we quarter continue digits did our more environment rate And in contribution should pass With next fundamental our

Moshe Orenbuch

very thanks much. Perfect,

Operator

we'll at next hear Jefferies. from John Hecht And

John Hecht

I up charge-offs. guys. did mean guess little than this up follow Good a the seasonal morning. pick see Thanks very I normal bit from in prior a question. year, we a of QX much greater

are offs mix is is to there influence I think or now, charge in X%. gross a points we just difference can QX. there usually around to QX QX from anything XXX And they this mean, is point seasonal were or the greater or I behind up anything basis that there?

Juan Carlos Alvarez de Soto

remember same a But XXXX. extensions, period we that a QX Yeah, much in extensions, provided we lot of extensions. there's of lot definitely QX of provided -- 'XX, QX, And less year seasonality. last provided

customer constantly the assessing pay thing practices sure We're doing extensions, making So servicing impact right to we're on them. or ability charge-offs. has lower sure that lower and reviewing willingness by an the to modifications and make that of we're the the our

lower that have would impact higher PDRs. as well charge-offs, an delinquency, a So inflow into lower on as

As can for you we're see, year. still expecting a by next our ratio charge-off stable relatively guidance,

John Hecht

final And recall, for. very you thanks much. have Okay, accounted you needs your agreement regulatory there? if us Scott, -- standings update us give an one Can be you on then to remind where that I

Scott Powell

and would making. Dallas. in those other you progress about feel at that, that both two company space, good we're And that holding is thanks, Consumer. I we these also in we've holding compliance Yeah, enforcement you I publicly is issues because hard on are it's here Santander about signs outstanding, and agreement making mentioned I written focused invested -- them. read really opening into tell one through the XXXX it a if to on lot comments company about are straight compliance. actions the very is addressing level is my progress. We those through the issues, SHUSA in The -- the referenced it John. I it, which talk mean,

any on of closed you put except lot can't a be I say when to really we so they'll out, guidance against And resources give that.

to absolutely look -- resolve get that. standards. at on We it And goes continue we're institution be committed there operating to And large focused financial it. and to

John Hecht

afford would flexibilities it would when released? and -- what if gets you, it it what And

Scott Powell

of U.S. overall the regulatory Consumer Santander and It's of in part assessment Santander the

of what And in the so of can I Santander the one view regulatory say. it's component U.S., that's

John Hecht

much. very guys you thank Okay,

Scott Powell

Thanks, John.

Operator

hear at up, Next Barclays. from we'll Mark DeVries

Mark DeVries

Hey, about other in finance and net guidance the a on digit thanks. Had income. interest XXXX for mid-single question the growth the

more I this think you like were X% up year. year-over-year

Just pressure some wondering bit balance or or of NIM growth slower either, of little both? that implies growth digit mid-single

Juan Carlos Alvarez de Soto

We’re -- I that of a in the mean lot of especially part year later the benefit originations the we’ve will XXXX. done,

in We’re will [ph] hikes. additional still I -- or still baking we’re more perhaps, one learn but afternoon two this

So if we continue to see a for higher rate headwind environment, a as you know us. that would still be

So forecast. on of there a it end should is some curve, we of that that pause, baked a to short this. out If turns in this get the be benefit especially the there

Mark DeVries

your it. That’s it felt on like helpful. you’ve that updating penetration makes the some contracts that us of of might it have FCA mean on take comments you Okay. based situation, at viable optimizing that months then six option should And provided progress to made that the improving more ago? Got existing your we Scott maybe Chrysler the

Scott Powell

presume company part I is speak They you had, the sales solid the mean that for Yeah, really made they year the discussion. that progress Chrysler, over significant. year, I pretty I I is think I had as a really doing know so. yeah, of well. think last wouldn’t to is And we’ve I said, think and but

Mark DeVries

you. Thank great. Okay,

Scott Powell

Yeah.

bet. You

Operator

we’ll up, Eric from Next UBS. at Wasserstrom hear

Eric Wasserstrom

last a effectively follow stable gross -- Juan bit also relative little a very just to rate you Thanks charge-off up much. loss on a year? guidance, anticipating Carlos to the are

Juan Carlos Alvarez de Soto

should net, about be on used we’re car stable gross should net stable guiding and also relatively be stable talking prices. so are We because

-- lines, would So of it yes. it fall on the same falls kind

Eric Wasserstrom

moving conservative posture, loss should in and the you’re little that the well? And follow of basically as XXXX, -- a more seasonality now a the of bit -- that you’re modification sounds XXXX experience to it like

Juan Carlos Alvarez de Soto

impact XXXX have of the impact large. and same but could lag you’re modifications could done seasonality lower some to early You of still the the by trends part -- have going XXXX, in

Eric Wasserstrom

given mod but TDRs, how year-over-year? a larger then that you’ve of think And in just terms just XXXX was just that a in how doing terms Okay. less little do much on mods, you’re that about talked lastly XXXX vintage we of the recognizing than units, about

Juan Carlos Alvarez de Soto

driver. going Still be to the the size main is

talk be type So but but of the that the -- sometime we still the doing expected might TDR same those mid-part to during stabilize base, balances, I think of the to at still lower of might just modifications when thing about is the is a have underlying expect we outlook them the a trend. much the trend, less for than we add XXXX vintage lower at level, bigger year, should that it a important XXXX.

Eric Wasserstrom

Thanks much. Okay. very

Operator

And comes at from Steven question KBW. Kwok our next

Steven Kwok

Thanks taking my question. Hi. for

any loan the personal the and Just wondering results like your of around portfolio, about on into sale there we are guidance? think updates should the it how XXXX

Juan Carlos Alvarez de Soto

Yeah.

there. no -- continue we So real update

in guidance there. for available We year, still make for alternatives sense it’s this remains our explore portfolio will And continue included to which that of as for sale. then next terms in

terms our at out the to transaction, looking even though you’re it’s relatively a flat regional intention general guidance of our In work performance.

Steven Kwok

installments then Got overall just originations charge growth contract the around retail portfolio it then what’s finance the around your and and assumptions growth? the

Juan Carlos Alvarez de Soto

and growth that are the had XXXX Yeah, like significant of -- there fact in I interest of net finance in will support so increase other XXXX. in said terms we’ve the income

SBNA we is our we service that then earlier the think for of is us, originations get as important prime us a we is terms sheet maintain specific They risk of level in I really important about said them with originations to could terms do core. guide. In want when there an the of stable for comes in especially none and to And growth that Like platform anymore. touches originations want But terms to the when a progress of thing sure is right. some paper applications that the presence. return of making adjusted we’ll model think it somewhat right balance our we new you line of at okay are least

Steven Kwok

Got for it. taking Thanks questions. my

Juan Carlos Alvarez de Soto

Thank you.

Operator

next we’ll O’Neil. Chris hear from up Sandler And Donat with

Christopher Donat

Good morning thanks for taking my questions.

just and Just rate or right the said it of one I and for the around is XX% there the both looking XX% to the unusual think you for year the appreciate tax lower sort XX% anything know fourth or…? quarter be of is would about or forward tax coming I number wanted full sort rate trying to with then ask quantify help in

Juan Carlos Alvarez de Soto

Yes QX state adjusted of so how one-offs yes there way our were accruing. accruals some tax we supply some we’re the reform, for the there some in components where just like certain adjusting were

year somewhere so full year XXXX we the XXXX, be XX% it For below the seen expect than in the somewhat that. better full effective call to we’ve rate of

Christopher Donat

think for comments so impact Scott the your hurricanes, said get then or far. minimal what we say was it is you, seen I forward on Okay, less the of and it just Magnitude trying of the -- refunds might timing right? worried to sense than impact a of little should comments for from and a because the both government or though is maybe then impact tax you we’ve bit going shutdown be small

Juan Carlos Alvarez de Soto

the folks Chris, even shutdown Yeah, last what lower for during exactly in the did hurricane was extensions we of season. did deferments that than year’s we level hardship government significantly

during orginations a happens our on because on you’re rate other why that’s small is mean rate right, ultimately I and impact loss the But that and concern very delinquency tax metrics, that our season period. has and so during big collections impact both another very delinquency then what So small. bigger

we’re there settled. get hopeful the issue So that we

Christopher Donat

Okay, got it, thank you.

Scott Powell

welcome. You’re

Operator

Rowan Next up, John at Janney. from we’ll hear

John Rowan

Morning guys.

the sounds do, like I like rates. past any in you where little you’re it there recovery gains flat Are over the are and Just the any quarter. vehicles, in way no slowed continue -- there down recovery in from been Looks better a for can almost it rate, there’s the improve we a year. looking mean as to there bit guidance me, you repossess -- your any fourth maybe do little one programs Is can far question the that recovery rate? change as

Scott Powell

Yeah go ahead, Carlos.

Juan Carlos Alvarez de Soto

No, there -- used an a our be talked feel should some think I expecting auction but X% talked that in we expectation XXXX that quarter be we about we decline was I seeing good prices. QX. had first good strong are continued have it of economists is the maybe the see strong forward said think a saw There going of performance. that industry we the unusually We last expecting it some normalization still still unusually to terms were performance we’re car should about we in we’ve summer, supposed and we about

stable in relatively a XXXX. recovery expect do performance we So

Scott Powell

always we're move looking efficient more we ways ways results margin. think for get at Yeah, that. That be would to good pretty auction better the always things in it. improve only and and We're looking at the John for lanes, to and we're

the the is be outlook the optimist X%. Carlos to that pointed Juan out for Just in XXXX down room

that outlook for car to mind we was X% that. So just year like X%. used down X%, prices And last in ended X%, be something keep up actually

the of actually. the of So demand I with strength of a pretty little our consumer you cars And salt view know things guidance. of those bit lot -- that's a on always take used the we're based and our optimistic. for But

John Rowan

Okay, thank you.

Operator

question comes at Shane next from Rick And JPMorgan.

Richard Shane

historically approach that back I Hey has portfolio. Bluestem. guys, on this to that contract been for thanks to circle selling taking questions The wanted and my considering just morning.

now year the then that the basically renewals. from are contract potential part We expiration of and a initial of

you that those Bluestem having instead approach negotiate we with not negotiating guys potentially of a with party point, them will exercise buyer options? As third about

Juan Carlos Alvarez de Soto

Yes.

XXXX, go -- would there with that until you okay. number extension tell we What in a explore that partnership about think alternatives. I process of different the is together can with I Bluestem

flow always sure, selling we're and mind not making that just well. we're selling in as portfolio, Just agreement a basically a keeping a

we alternatives other all than I the there from a angles. isn't extend until XXXX. there that that lot to But they the whole So tell have you ability explore can different

Richard Shane

again the year XXXX as and But relationship. it it's make it. I does April or extension. and contract -- of close don't a a distortion does that that the extensions recognize sense you Got buy to but know I optics extension it of two, two with look in the try a there's again between economics year that extension? two them out sense know if to make year one And

Juan Carlos Alvarez de Soto

have I alternatives. to really… looking we're all Again at

Richard Shane

it. Got

guys. you thank Okay,

Juan Carlos Alvarez de Soto

questions. Thanks for your

Operator

Our from comes Stanley. Betsy next question at Graseck Morgan

Betsy Graseck

be? or if sense us hikes, morning. a or the your got case to rate questions, to would I'm us. in guidance Juan you two what Good provided could you've rate Carlos, hikes there you forecast wondering no that Hi. you as were I Couple one give mentioned in NII that think base

Juan Carlos Alvarez de Soto

be points you be there. that the analysis hedging have have for a digit. would it and chart say look perform you'll sensitive. on probably When giving you, Q our and But We're benefit. have on the we how in [ph] certainly will how liability would XXX outlook at It It still financials our depend rate you'll our adjusted. of our basis would K, certainly -- I'm a mid-single yearly initially we sensitivity upcoming

the can work - of end would So better say in guidance. from we the I just the there.

Betsy Graseck

looking the been I might anything hike. like you that's quarter, or that, be specific prior quarters going funding it quarter level if looked bit with there's the agree repeated know today, likely interest than the forward. would for through to this more impacted Because Okay. results don't of a rate not costs to if little have

Juan Carlos Alvarez de Soto

have rates portfolio Yes, yes. November of less had call less -- with we it's we of especially from that Betsy, our regards moves specifically late it okay. December, the interest we contribution derivatives because and saw, to a

component mark-to-market portfolio what we the the past. beneficial wasn't as cut So derivative as in the of had

Betsy Graseck

Okay.

Operator

next with Cyganovich Arren from Citi. comes And question

Arren Cyganovich

of With thoughts Thanks. allowance respect provide to go have on for we've CECL? CECL, to allowances, to to companies get how some that volunteer any you Do magnitude increase started with preliminary respect the and ideas much some of up financial have to XX.X%. might to

Juan Carlos Alvarez de Soto

We we which next specific making will peers guidance time that yet. ready on by like a providing not all year are are this our working sure We're we be.

give We point, this running mid-year At expect parallels can't number. a specific you I or to be sometime so.

kind regarding will how of our We going especially forward, ratios, how also related capital might CECL how -- at a CECL topic CCAR right. looking impact impact or are submissions is

us that to analysis [ph] done the a still for be came going little that out give thoughts. more clarity think in final there's So I NPO bit more a but

And to CECL we submission, in as to hope be the As at year you able XXXX later in know then we look there. is not our provide more there. clarity

Arren Cyganovich

Okay.

don't any submission? in for having your plans this to anticipate So you upcoming capital change

Juan Carlos Alvarez de Soto

No. Not in this upcoming submission.

Arren Cyganovich

modeling thing, one legal, you just a then that? for had the you expenses in And there better of mentioned can the benefit -- what's outcome in a was magnitude quick

Juan Carlos Alvarez de Soto

somewhere it legal about be press. So specific the the matters. them of impact But some have some would between benefit talk would All-in-all, XX. we probably and don't XX be, call received

Arren Cyganovich

Thanks. Okay.

Operator

hear at Up Vincent from next Stephens. Caintic we'll

Vincent Caintic

Hey, thanks. Good morning, guys. It's great to see this growth. the continued pressure on [ph]

near questions two long-term. and the on So

think think rate, think to about the long-term, the from just of the want soon. -- the done And if [ph], do be So seems and pipeline lot there's sense you've when seen a when what I model to like a you get you this going is penetration when rate? think we like rollouts that subvention near-term, rollouts about about lot have the FIAT campaign a out RAM and It some of activity pickup truck new there's well coming recently. of the recent

a want just get to of So any sense Thanks. campaigns?

Scott Powell

Yes. Vincent. Thanks

think average. I, were, on XX% So on gotten we yes I kind question, reasonable year to improvement mean, --I first we've a to mean, yes, significant from place. was I half penetration XX% of rate a think the where more so from I

the other second improve incentives I don't certainly. and answer that are wouldn't to look [indiscernible] control put bonus to So to we into -- your question, that, market. we continue But convention

Certainly, coming a do of can't the really models so one in good out. have yet. give really And partner, some they I answer cool case just that on Chrysler, you our

hopeful we're So there.

Vincent Caintic

Thanks. secondly on just And the charge-off rate.

year-over-year. you basis points quarter XX charge-offs, So charge-offs higher net this had

driven XXXX? compares have the being charge-offs And guidance flat of kind how might Just in that. of to wondering that what year-over-year then

Juan Carlos Alvarez de Soto

impacted to modifications you when I providing that in about level goes at point just QX a the by made that verses QX Yes, look 'XX off charge earlier was how, we QX 'XX. ratio that lower think 'XX,

higher the the If of ratio charge a That you better period for was when will the have you time. of normalize in same that, big or off drivers include one for quarter. that you delinquency and

Vincent Caintic

you much. Thank very

Operator

we Elliot will Autonomous at Jeffrey next And Research. hear from

Scott Powell

Hey, Jeffrey.

Jeffery Elliot

that Thanks. Thanks The morning. implications summer to in originally one of give question. kind December. agreements Good Chrysler. tolling what's expire Hi. that an the for are? of taking what update the statutes the Good us back Can place on I've got waive due put in and there in you happened of to was on limitations morning. that the more you

Scott Powell

just a I conversations, and very and more sales to cover those anticipate focused that. we're the Yeah, changes said, support to of And with things. other their now with them. I like to don't are range respect And constructive right with honestly, I them mean, working any closely on continue conversations

… So

Juan Carlos Alvarez de Soto

specifically agreement I mean tolling to the is expired.

Scott Powell

Yeah.

Jeffrey. Sorry,

You still there?

Jeffery Elliot

serving from, was of last through guess, the that place end in or to while was it I June July What year? purpose

Juan Carlos Alvarez de Soto

simply we said parties tolling where both could April we in of status while Like have XX. of in summer a discussions quo was the the to agreement just back for have that the there period preserving as

in the discussions has period So a is, to And that tolling it for way Nothing a That certain agreement impact. place the number described. it months. in the was expired. Scott are of evolving really as

Jeffery Elliot

Thanks very Great. much.

Juan Carlos Alvarez de Soto

You're welcome.

Operator

last Piper our Barker from Kevin at comes Jaffray, And question

Kevin Barker

morning. Good

of of managed the versus of performance for the loss XXXX How some that XXXX? impacts early discussed the You've XXXX. guidance your indications

Juan Carlos Alvarez de Soto

right. XXXX, we Yeah, say should the first, well,

We it that. to between expected talked And perform we're XXXX. we said and prior definitely to have XXXX the We about vintage continue for -- seeing somewhere that in calls.

adjusted We're risk in profitability. expect XXXX. we For right bit a larger to same than returns, it's would also vintage be the getting right that's XXXX a the And it neighborhood. the

all the our net together off of charge XXXX guidance support of that mid-X%, in in for So the ratio somewhere

Kevin Barker

some then CCAR to follow early CECL, happen? you discussions any discussions of of they're -- with Can the and on you had some or expand Okay. what up any as discuss comments agencies well. upon rating could potentially with the going treat if to And and the of CECL or how your

Juan Carlos Alvarez de Soto

the -- regards to agencies. to this Nothing really rating to meaningful about the talk specifically with at point

Kevin Barker

my questions. Thank you taking for

Scott Powell

Thanks Kevin.

Operator

this now there are call the no for And time. I over questions will Scott further to at turn final comments. Powell

Scott Powell

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

if up available is you we quarter next to team to progress. questions. relations Thanks. investor follow you speaking And our always have forward our about As look

Operator

And We this your participation. presentation. you does thank for conclude today's

may You now disconnect.

Santander Consumer USA (SC) 30 Jan 192018 Q4 Earnings call transcript