New Santander Consumer chief: Fiat partnership is still main focus

Why fix what isn’t broken?

That seemed to sum up the general outlook for Santander Consumer USA Holdings this year, judging by executives’ remarks Wednesday. On a conference call to discuss the company's fourth-quarter results, Mahesh Aditya — who took over as president and CEO in December — said there would be “no change in strategy” for the auto lender.

The Dallas company's preferred-lending relationship with Fiat Chrysler will continue to be "our primary focus and area of importance,” Aditya said Wednesday.

Santander Consumer signed a 10-year contract with Fiat in 2013, but the long-term viability of that relationship was called into question in May 2018 when the automaker’s then-CEO floated the idea of forming its own captive finance company. A year later, Fiat’s leadership said it would shelve that plan. Santander Consumer paid $60 million to the automaker to preserve their relationship but has not elaborated on what that agreement entailed.

In the fourth quarter, the relationship helped boost Santander Consumer's total auto originations 9% to $7.5 billion. Loans made through Chrysler Capital rose 29% on a yearly basis to $3.2 billion, while leases made with Chrysler fell 15% to $1.8 billion. Core retail auto loan originations rose 9% to $2.4 billion.

Santander Consumer also wants to ensure an arrangement it has with a sister company, Santander Bank in Boston, continues to run smoothly. Under the arrangement, Santander Consumer originates auto loans directly onto Santander Bank’s balance sheet but retains the servicing.

Aditya became the head of Santander Consumer when his predecessor, Scott Powell, left to become chief operating officer at Wells Fargo. Previously, Aditya was the chief risk officer for Santander Holdings USA, the U.S. subsidiary of Banco Santander in Madrid. Before joining Santander in 2017, Aditya worked at Visa and Citigroup.

Net income at Santander Consumer increased nearly 40% to $146 million from the year-earlier quarter. Earnings per share totaled 43 cents, beating the mean estimate of analysts surveyed by FactSet Research Systems by 6 cents.

Net finance and other interest income ticked up 1% to $1.2 billion.

Credit quality also improved in the fourth quarter. The delinquency ratio for loans 30 to 59 days overdue fell 130 basis points to 9.7%, while the delinquency ratio for loans overdue by more than 59 days fell 90 basis points to 5.1%.

Meanwhile, Banco Santander also reported earnings on Wednesday. Underlying profits rose 2% to a little over $2 billion euros in the fourth quarter, with particular growth in its businesses in the Americas.