Santander Consumer USA Holdings in Dallas has
The subprime auto lender also said Thursday that it had found an ongoing set of "material weaknesses" in the way it calculates its set-aside for bad loans, ranging from a lack of oversight to unsound business planning.
Santander is "working to develop plans" to address those weaknesses, the company said in its annual 10-K regulatory report that was filed a month late. No additional details were provided about the steps it plans to take.
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Santander Consumer USA Holdings said that it is changing certain accounting practices after the Securities and Exchange Commission raised questions about the firms methodology.
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Santander Consumer USA Holdings delayed the filing of its annual report Monday amid discussions with the Securities and Exchange Commission regarding unresolved accounting issues.
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Chargeoffs jumped 13% at the Dallas lender, and its warning that they could increase further because of deterioration in subprime auto lending set off alarm bells about the broader consumer finance market.
January 27
In the filing, Santander revised the way it calculates its provision for loan losses. The changes lowered fourth-quarter profits significantly, to $12 million. It initially reported a profit of $68 million in mid-January.
Santander's full-year profits for 2015 and 2014 were each revised downward by about 5%, as the new accounting method drove credit costs higher. Earnings for 2013 increased 2%.
"After completing this process and revising our methodology, we remain confident in [Santander Consumer's] ability to execute on its business plan," Chief Executive Jason Kulas said in a press release Thursday.
The 10-K was due Feb. 29, but the company
Santander in October
Under the changes announced Thursday, Santander will revise its assumptions for the expected losses on modified loans known as "troubled debt restructurings."
Additionally, it will make a series of changes to "nonmodeled factors," the company said.
In the past year, Santander has
"Our control environment is of the utmost importance to us, and we will remain focused on the remediation efforts," Izzy Dawood, who joined Santander in December as chief financial officer, said in the news release.
Dawood replaced Jennifer Davis, who had served as interim CFO following a
The long-awaited 10-K filing actually helped calm investors' nerves about the embattled company, Steven Kwok, an analyst with Keefe, Bruyette & Woods, said in a note to clients. While Santander lowered its earnings for the past two years, it also provided more clarity to the market about the issues it faces, Kwok wrote.
Indeed, Santander shares jumped nearly 18% on Thursday, to $10.49 per share. Still the company's stock price remains down more than 40% compared with the beginning of the first quarter.
The moves announced Thursday are part of a long-running string of headaches for the company — a unit of the Spanish banking giant Banco Santander.
Meanwhile, the company's credit quality has deteriorated in recent months, as it aggressively courts borrowers with blemished credit histories.
The business model has attracted scrutiny from state and federal regulators, including the