Auto lending

The price for the 20% stake in Santander Consumer USA Holdings that Santander does not already own is significantly higher than what the buyer first offered in July.

The Detroit company, one of the nation's largest car lenders, enjoyed a surge in profits during the second quarter, largely due to strong consumer demand for vehicles. But how long will the good times last?

The Spanish bank’s U.S. holding company said it will pay a premium to purchase the publicly traded shares in Santander Consumer Holdings. The proposal is subject to the approval of the auto lender’s board of directors.

Surging used-car prices — brought on by a combination of strong consumer demand and limited new-vehicle supply — are boosting loan yields and profits at the Detroit company.

In the midst of the pandemic recession, banks have benefited from government stimulus payments to consumers, low interest rates and constraints on the supply of new vehicles. But intensifying competition and real concerns about borrowers’ ability to pay loans that went into forbearance could soon threaten profits and credit quality.

Rohit Chopra, President Biden’s nominee to lead the Consumer Financial Protection Bureau, has not minced words in calling out private companies for wrongdoing. He could get a grilling from Banking Committee Republicans and some opposition on the Senate floor.

The extension rates were the highest since the peak of lender deferrals granted in the wake of the COVID-19 outbreak.

The automaker is reportedly planning to apply for a bank charter so it could collect deposits and grow its own auto-finance business. That could create more competition for Ally, which was spun off from GM in 2006 but remains a key lending partner.

Payment rates for auto lenders and credit card issuers have remained strong despite a spike in unemployment. Whether these trends continue into 2021 will depend largely on the actions of Congress and the pace of medical advances.

The subprime lender cited low odds that Washington will deliver further economic relief, and the fact that $1.5 billion of loans whose deferral period expired are now more than 30 days behind.