Santander Consumer USA Holdings on Wednesday reported a sharp drop in profits, due to losses tied to its
The Dallas-based subprime lender — a unit of Banco Santander — earned $67.7 million in the fourth quarter, down 73% from a year earlier.
"Recognizing our reported results for the quarter are challenging, there are several factors that are not a true reflection of the earnings power of our franchise," Jason Kulas, the chief executive of the $36.5 billion-asset company, said in a press release.
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Santander Consumer USA Holdings plans to exit personal lending and focus primarily on its auto-finance business.
October 29 -
The auto lender has changed the way it calculates its closely-watched provision for credit losses, a move that added to third-quarter profits and raised questions about the transparency of its loan book.
October 29 -
Santander Consumer USA Holdings expects to endure more credit losses in the coming quarters, as it expands its portfolio of higher yielding, subprime loans. But its CEO sought to assure investors that its profits would far exceed those costs.
July 30
Accounting changes related to Santander's planned
Santander recorded a $225.6 million loss on investments, due to the reclassification of personal loans on its balance sheet, compared with a $21.3 million gain a year earlier. The company attributed the losses to consumer defaults, as well as "market discounts on seasonally higher balances."
Overall, noninterest lines of business — including the investments — produced a loss of $96.4 million, compared to a gain of $133.4 million a year earlier.
Loan growth helped offset the investment losses. Total originations rose 2%, to $6.2 billion. Net finance and interest income jumped 17%, to $1.2 billion.
The company's set-aside for problem loans rose 43%, to $800 million.
Santander in October overhauled the
Operating expenses edged up 3%, to $239.3 million.
