Santander Consumer Holdings USA in Dallas on Wednesday reported lower quarterly profits due to ongoing issues associated with its discontinued personal loan business.
The $39 billion-asset subprime auto lender earned $213 million during the third quarter, a decline of 10% from a year earlier. However, diluted earnings per share were 59 cents, or 7 cents higher than an estimate of analysts polled by Bloomberg.
Credit problems with the personal loans – a business Santander exited last year – were a drag on results. The $1.3 billion portfolio is currently classified as held for sale, meaning that, under accounting rules, credit issues are recorded as investment gains or losses.
Fee-based revenue plunged to $27 million, compared with $154 million a year earlier, due to credit losses from the personal loan portfolio. Servicing fees and other commissions held mostly steady.
Net finance and interest income declined 3% to $1.2 billion. The provision for credit losses fell 15% to $610 million. Originations plunged 32% to $5.2 billion as the company continues to pull back on lending to borrowers with blemished credit histories.
Noninterest expenses rose 9% to $285 million because of higher compensation costs.
The company also announced that it is "finalizing a strategic agreement" with Banco Santander – its Spanish parent company – to originate prime loans. No additional details about the agreement were provided.
The results follow a rough period for Santander. The company has restated earnings three times over the past year because of problems with the way it calculated provisions for credit losses and other reasons.