Santander Consumer reports 14% jump in auto loans

A 14% increase in auto loan originations at Santander Consumer USA Holdings more than offset a reduction in car leasing during the first quarter.

Retail auto loan originations totaled $2.62 billion, up from $2.29 billion in the same period a year earlier. Total new leases declined by 6% to $1.97 billion.

The Dallas company reported net income of $248 million, up 1% from the first quarter of 2018.

Unlike some banks in the auto lending business, Santander Consumer has been growing its portfolio at a strong clip. The company’s originations increased on a year-over-year basis for the fifth consecutive quarter during the first three months of 2019.

By contrast, both JPMorgan Chase and Wells Fargo reported negative auto loan growth during the first quarter. Ally Financial reported 3% growth.

Those banks all focus more heavily on borrowers with prime credit scores than Santander Consumer. During the first quarter, two-thirds of its loans were made to borrowers with no credit score or a score of 640 or less.

Juan Carlos Alvarez de Soto, the chief financial officer at Santander Consumer, said that macroeconomic factors continue to point to a resilient consumer lending environment.

“Consumer confidence remains high, and unemployment levels continue to be at historic lows,” he said Tuesday during a conference call with analysts.

The company’s credit performance was mixed during the first quarter. The net charge-off rate on auto loans was 8.6%, up from 8.3% a year earlier. But the percentage of loans that were at least 30 days late fell substantially, from 17% in the first quarter of 2018 to 12.6% in the same period a year later.

The strong growth in auto loans during the quarter was driven by loans made under Santander Consumer’s partnership with Fiat Chrysler. Those loans totaled $2.44 billion, up 23% from the first quarter of 2018.

The future of the lender’s partnership with Fiat Chrysler was called into question last June, when the automaker said that it planned to establish its own lending unit.

Santander Consumer CEO Scott Powell said Tuesday that talks between the two companies are continuing. “As we said last quarter, they continue to be constructive and positive, focused on optimizing the existing contract that we have in place,” he said.

Powell is also the CEO at Santander Bank, the U.S. subsidiary of the Spanish banking giant Banco Santander.