Santander’s 1/4 Billion First Q

DALLAS, April 24, 2018 /PRNewswire/ — Santander Consumer USAHoldings Inc. (NYSE: SC) (“SC”) today announced net income for the first quarter ended March 31, 2018 (“Q1 2018”) of $242 million, or $0.67 per diluted common share.

The Company has declared a cash dividend of $0.05 per share, to be paid on May 14, 2018, to shareholders of record as of the close of business on May 4, 2018.

“Our focus has been on optimizing pricing, ensuring strong credit risk management and improving dealer and customer experience,” said Scott Powell, SC President and CEO, who is also CEO of Santander US. “We delivered strong financial performance in the first quarter and increased originations across all of our channels, including Chrysler loans and leases.”

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Juan Carlos Alvarez, Chief Financial Officer, added, “During the quarter we saw continued stabilization in credit performance with a lower net-charge-off ratio and stable delinquency ratios compared to the first quarter of last year. This led to strong financial performance in the first quarter and we remain focused on increasing volume with the appropriate risk-adjusted returns and disciplined expense management.”

Q1 2018 Highlights (variances compared to the first quarter of 2017 (“Q1 2017“), unless otherwise noted):

• Total auto originations of $6.3 billion, up 18%
  • Core retail auto loan originations of $2.3 billion, up 4%
  • Chrysler Capital loan originations of $1.9 billion, up 24%
  • Chrysler Capital lease originations of $2.1 billion, up 31%
• Chrysler average quarterly penetration rate of 28%, up from 23% during the same quarter last year
• Net finance and other interest income of $1.0 billion, decreased 8%
  • Net leased vehicle income of $146 million, increased 14%
• Retail Installment Contract “RIC” gross charge-off ratio of 18.5%, up 40 basis points
• RIC net charge-off ratio of 8.3%, down 50 basis points
• Troubled Debt Restructuring (“TDR”) balance of $6.0 billion, down from $6.3 billion as of December 31, 2017
• Auction-plus recovery rate of 55.1%, up 400 basis points
• Return on average assets of 2.4%, up from 1.5%
• Common equity tier 1 (“CET1”) ratio of 16.9%, up from 13.8%
• Expense ratio of 2.4%, flat
• Asset sales of $1.5 billion executed through the Santander flow agreement
• $3.3 billion in asset-backed securities “ABS” offered and sold
• Launched pilot program with Santander Bank, N. A. to facilitate the origination and servicing of primarily Chrysler loans
• Reached agreements with AutoFi and AutoGravity expanding SC’s digital partnerships in an effort to further streamline and simplify the car-buying process for consumers

Subsequent Events:

• Completed prime auto loan portfolio conversion with a new third party increasing serviced for others balance by $1.0 billion
• $1.0 billion in ABS offered and sold via the SDART platform

Finance receivables, loans and leases, net¹ of $34.8 billion, flat compared to $34.8 billion at December 31, 2017.

Net finance and other interest income decreased 8 percent to $1.0 billionin Q1 2018 from $1.1 billion in Q1 2017, primarily driven by lower average RIC balances and an increase in benchmark rates.

Servicing fee income decreased 17 percent to $26 million in Q1 2018, from $32 million in Q1 2017, driven by lower prime originations and lower prime asset sales. SC’s serviced for others portfolio of $8.7 billion as of Q1 2018 is down 21 percent from $11.0 billion the prior year quarter.

RIC delinquency ratio² of 3.8 percent in Q1 2018 was stable compared to 3.9 percent in Q1 2017.

RIC net charge-off ratio³ improved to 8.3 percent in Q1 2018 from 8.8 percent in Q1 2017. Provision for credit losses decreased to $459 millionin Q1 2018 from $635 million the prior year quarter.

Allowance ratio⁴ decreased 30 basis points, to 12.3 percent at the end of Q1 2018, from 12.6 percent at the end of Q4 2017.

Recorded net investment losses of $87 million in Q1 2018, compared to net investment losses of $76 million in Q1 2017. The current period losses were primarily driven by held for sale accounting for SC’s personal lending portfolio⁵. Excluding the impact of personal lending, net investment losses totaled $28 million.

During Q1 2018 SC incurred $288 million of operating expenses, down 6 percent from $305 million in Q1 2017. SC’s expense ratio of 2.4 percent for the quarter, was flat compared to 2.4 percent during the same period last year.

¹ Includes Finance receivables held for investment, Finance receivables held for sale and Leased vehicles.
²Delinquency ratio is defined as the ratio of end of period delinquent principal over 60 days to end of period gross balance of the respective portfolio, excludes capital leases.
³Net charge-off ratio stated on a recorded investment basis, which is unpaid principal balance adjusted for unaccreted net discounts, subvention and origination costs.
⁴ Ratio for allowance for credit losses excludes end of period balances on purchased receivables portfolio of $39 million and finance receivables and personal loans held for sale of $1.6 billion.
⁵The current period losses were primarily driven by $59 million of lower of cost or market adjustments related to the held for sale personal lending portfolio, comprised of $106 million in customer default activity, partially offset by a $47 million decrease in market discount, consistent with typical seasonal patterns.

Conference Call Information

SC will host a conference call and webcast to discuss its Q1 2018 results and other general matters at 9:00 a.m. Eastern Time on Tuesday, April 24, 2018. The conference call will be accessible by dialing 888-394-8218(U.S. domestic), or 323-701-0225 (international), conference ID 7441298. Please join 10 minutes prior to the start of the call. The conference call will also be accessible via live audio webcast through the Investor Relations section of SC’s corporate website at https://investors.santanderconsumerusa.com. Choose “Events” and select the information pertaining to the Q1 2018 SC Earnings Conference Call. Additionally, there will be slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download and install any necessary software prior to the call.

For those unable to listen to the live broadcast, a replay of the call will be available on the Company’s website or by dialing 844-512-2921 (U.S. domestic), or 412-317-6671 (international), conference ID 7441298, approximately two hours after the conference call. An audio webcast of the call and investor presentation will also be archived on the Investor Relations section of SC’s corporate website at https://investors.santanderconsumerusa.com, under “Events”.

Forward-Looking Statements

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

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