Santander Consumer USA Holdings -- and by extension, the entire subprime auto market -- has faced another round of negative publicity. Most of it is overblown.
On March 13, The Wall Street Journal noted a rise in subprime delinquencies, and hinted that the sky is falling.
That didn’t help Santander, which saw its stock price fall 20 percent at one point, although a number of other issues also hurt Santander’s shares. Those included a March 15 admission by the company that it wouldn’t be able to file its 10-K with the Securities and Exchange Commission under an extended deadline, and the earlier departure of Santander’s CEO.
Back to subprime delinquencies. A March 17 report by UBS Securities, which rates Santander a “buy,” examined Santander’s latest filing, for February, of that status of its Santander Drive Auto Receivables Trust, the package of auto loans it had bundled and sold on the asset-backed securities market. UBS analysts concluded, “While cumulative net losses are up slightly y/y, delinquencies have declined.”
The report added: “We view a recent slight loss of market share as an indication that [Santander] is not being overly aggressive in the current auto lending environment and raising pricing to offset risk.”
Some auto dealers may see Santander’s aggressiveness in their market and with certain segments of the car-buying market differently than the UBS analysts.
But the folks who watch lending trends continue to agree that if subprime delinquencies are up, that’s because subprime loans are up. The percentage of subprime loans that become delinquent is still well within historical trends.
The sky isn’t falling. Auto lending remains a good business for those who know how to manage risk. F&I managers who are willing to work at getting credit for customers who need help will continue to be rewarded for making that vehicle sale happen.