Santander Consumer USA (SC) 29 Jan 202019 Q4 Earnings call transcript

Good morning, and welcome to the Santander Consumer USA Holdings Fourth Quarter 2019 Earnings Conference Call. At this time, all parties have been placed in listen-only mode.

Following today’s presentation, the floor will be opened for your questions. [Operator Instructions] It is now my pleasure to introduce your host, Evan Black, Head of Investor Relations. Evan, the floor is yours.

Nicole. Thanks thank the and everyone. for you morning call joining Good

Aditya, we Chief Chief On today Mahesh Financial President Karam, the call Fahmi have and and Executive Officer. Officer,

the SEC Please statements and those to a issued for XX, measures we may X-K non-GAAP those to Certain believe maybe certain We Risk to forward-looking. reconciliation XXXX. reference is measures today our with of made statements. included public January U.S. investors financial filings also respect will and Factors useful in refer today, GAAP that be

With that, over to Mahesh. CEO, our I'll turn it

involved Thank Officer these roles strategy I’m to of Santander am I joined you that's how member roles direction most Chief the I and of of and of to good in board by I I various Operating been great morning was Consumer. strategic Santander work in everybody. at recently U.S. as excited Chase, done to therefore risk One of and be Capital continue XXXX, the CEO I opportunity honored the In Officer and executive past each to Santander years. significantly start Santander, Consumer, and Risk Citibank, want serving be Visa. Prior able the held few to as Santander operational with a President appointed management these and company's the as programs. Chief saying the

wish dedication best Consumer and few all know new over I the time I'd like behalf and XX great a last and through navigated Santander, us Powell for at years to U.S. his of the leadership Scott Scott as his we of of Santander him he thank years in role. for successfully on Santander change.

have quarter and cover a our regarding the I I tender Before offer. few highlights, XXXX remarks fourth

announced our we've expect billion offer $X tender by commence we shares. to As you've repurchase to a now that seen

we further issued last cannot release than much press evening. Although expand the

repurchase to is $X.XX shares billion capital up during dividends in distribution the authorized a cycle, and current reminder pay share. to As of SC quarterly $X.X per

with of previously capital aligns tender use these authorized excess and capital. therefore efficient actions The offer our

capital One evaluating growth. efficient SC shareholder constantly recent Gateway as The portfolio from Lending we towards value. more We’re work of well are opportunities as tender acquisition creating examples capital deployment December's offer as

to Let's full-year some turn of to X highlights. Slide discuss our

several were as which depth push all appointments the and leaders our internally management of to at to and leadership business appointed recently There entire the SC. Shawn team we leadership key to continue during excited of XXXX, and speak I'm with the XXXX forward. in were Fahmi, our team work sourced

it versus were From prime We Chrysler, Program. had and was and by breaking which Originations loans our by year, year, an billion origination with perspective, a total increase partners Santander at yet XXXX, up $XX than the in X% for high Santander originations all-time driven this further another was strong an Bank collaboration record Chrysler Consumer. particularly more auto Fiat

supports value we SBNA, FCA U.S. originated loans, auto the with of across and demonstrates franchise. $X Santander’s our which of To relationship collaboration billion

Fiat with from XXXX mutually a Another beneficial reached we Chrysler. key highlight was agreement

the During focusing and ever with we our we inception the highest able XXXX, on were penetration the dealers. accomplish interests FCA by of contract. achieved since aligning rates this annual to And

a backdrop. are the basis and improvements The points macroeconomic in of XXXX, net lowest be from down strong in an delinquencies Late improved performance $XXX X.X% net recoveries. charge-off the and years. four stage was environment Credit delinquencies, continue SC during XX basis Also supported across XX the of towards XXXX. ratio points XXXX, to earned high in last return at industry assets. decreased all-time NCO with on million and income charge-offs at end in prior-year rate X.X% Recoveries by board full-year strong

nonmetal $X.X and from recoveries there, also metal XXXX, decreased rate XX% related prior-year balances however and point reflecting the basis more recovery increase TDR quarter which than billion credit a quarter. totaled modification. includes four due XXX in Our better loan performance to

number market demonstrating the was auto platforms. executing ABS the During demand in our XXXX, ABS billion the in issuer $XX.X investor of one strength SC ABS and

revolving We revolving better the us results over auto first also benchmark take will to loan This the in ever advantage ABS launched cost non-prime platform. allow rates lower of which five-year term to of turn at Fahmi a review liquidity our that of over assets. to that, I'd funds investors increased access effective to for more the and increase detailed duration With call results. like

Mahesh and everyone. good Thanks morning

our environment that The remains remains levels. Building The to labor credit for said In environment and strong decrease, XXXX, X moderate a of supportive what In marked a XXXX balance than influence is industry the year. forecasting fifth Turning sales, some economic Slide to continues performance. are our to XX and Mahesh last key resilient support at high sold. continue the on sheets units consumer improve. market and to household business. confidence originations macroeconomic experts slightly lending million indicators the million year competitive vehicle environment. new of at XX regards sold Consumer lower least consecutive

severity be vehicle demand remain from and used credit strong. to stable The consumers few there factors influence X, On as that continues our performance. key are Slide market loss

bankruptcy led and two prices year in QX with the moderated line and last the used mentioned deficiency recoveries Our The quarter. nonmetal quarter was patterns the recovery overall of metal past. we to in in months vehicle experienced and October trend better sales in seasonal is rate, year-over-year. the in The typical which in softening includes XX.X% proceeds, in final

loss points to year non-prime with compared last select, portfolio. and delinquency Additionally, data improve our consistent trends to net securitization industry

trends. for origination to X Slide Turning

auto XXXX, record X% more for originations, and up company. XXXX SC a than from billion originated During $XX of the

is offers quarter origination Chrysler driven which Bank. to segment, Capital year, For with Capital the X% increase a XX%. the the from than XXX is prior Chrysler program increased Santander to loan by fourth Similar exclusive quarters quarter. originations quarter, core loan in the originations prior-year the greater coming FICO increased compared this and

originations QX quarter fourth due decreased from last months QX year was well continuation first lease FCA really in the XX% a leased The trend lease as versus space, XXXX. the to competition of volumes of nine the as elevated The year. in

we lease largest down in XXXX. with the than leases originator remain billion FCA for Although more X.X year-over-year,

our our profile volume The continued with our FCA, respect due is growth to while originations our maintaining our competitive remain and with to progress disciplined return non-prime We dealers processes. the and risk position. origination of

loans expect in to to prime while our maintain share strong support to lease. We continuing market continue FCA

our mutually believe SC has the to established by with results. to our and operating rest succeed that positioned FCA in Turning agreement as an which for the contracts FCA FCA we results. both Page during X a reached of XXXX beneficial we Remember, evidenced framework

the highest stability programs our full-year collectively contract FCA XXXX offer penetration consistency achieved of since and for the we to inception in year the our with rate The We of with the our customers. XXXX. the key dealers and differentiator XX% ever penetration is this

servicing drive service X, other to in Turning we for balances. Slide our leverage continue capabilities to to and ways growth our identify

the balance in servicing For also $XX During with we quarter. Service million of The $XXX added $X.X Others For transaction billion income origination the year-end. part Others Santander subsidiary. we I'll platform of portfolio. a little One quarter, with fee this our cover platform Gateway TCF is as million December the in a included XXXX, but Service later Lending, SFO That a not agreement In SFO portfolio the to Bank. announced the via bit generated

In million origination fees, are our and SBNA items. addition fees fees, those servicing other to $X in of line commissions

X% Interest lower sales income quarter. our balances, vehicle the to Net XX% and to quarter Moving lease for continued gain the finance balances, on the versus performance on by net Slide financial prior-year compared prior-year increased prior-year X loans quarter. million X% up the average $XXX receivables quarter. by higher to to for driven quarter loan of review due income offset lease in growth leased increased versus

with and levels higher our credit from the credit X% balances. of a increase in increased expense receivables $XXX lease the TDR line balance Provision Interest decreased to $XXX portfolio. driven due performance million derivatives relatively lower down losses million for and strong lower in by debt quarter, and contribution loan outstanding our in to

Total lending $XX the sale held the other million loss a to for income of personal related in included million $XXX quarter portfolio. and recorded adjustments

Slide results. million increased average levels XX% and up balances, increased for due record our the versus and by tax corporate year continued X% the a expense in distributions. higher net X% $XXX in receivables higher loan benefits on prior-year income our turn reform capital also to due lease balance growth XX% Net was to Next company to outstanding Interest driven the leverage Interest asset balances. XXXX. additional full-year from we'll with review finance increased to debt of loans of higher income excluding XX vehicle the one-time and

lower elevated $X.X in adjustments by to the strong million few decreased to tax balances. TDR continued losses expense statutory Income prior-year due in performance XXXX Provision credit to updated for credit down one-time was year filings. $XXX unfavorable a in rates income, and and higher year, driven billion the

cover Our through tax outlook a go rate. guidance. tax higher the I’ll when corporate our rate statutory later tax slightly we rate remains bit than

Earnings XX $X.XX expense increased points, income improved the a driven repurchases. combination higher delinquencies XXX Slide of while basis share delinquencies a in basis balances early versus of quarter per result to prior-year as by our and stage share of count share increased stage in prior-year for lower on points. to XX provision market decreased open the a Continuing addition year decreased the to late due

delinquencies on loss into as have As and normalized, past, remains. lower we the have and charge-offs portfolio a have loan an modifications lower have time TDRs. impact modification improved referenced lower delinquencies, levels Over in inflows

driven the of QX XX.X% of Regarding The by year, last gross decreased basis recovery rates. last ratio XXX X.X% losses, QX XXX net well lower strong from as RIC points year. gross basis points charge-off ratio from as decrease charge-offs charge-off

continues dealer implemented on to to the as the XXXX and done improve servicing we've improve we've strategies result the all back-end. the front-end, credit Our the work on metrics of a throughout experience

up the which year. losses Turning average lower which Breaking in prior-year more the by figures recovery billion to to million loss balances losses ratio XX and review primarily from $XXX to in a RIC to decreased better charge-off by dollars, change rate $XX million. are decreased for million. million decreased versus were were higher charge-off by due These $XXX last than Slide $XX offset quarter growth loan $X.X down million losses $XXX net

Slide as the the last due represents XXXX, $X At which QX TDRs offset reserve this decrease million overall due on adjustments $XXX percentage X.X% to quarter. totaled decrease total reserves allowance at to $XX to quarter. to an decreases due million continues and overall are allowance and XX. million to offs $XXX provisions on decrease to the billion, attention ratio increased new regards increases as performance and block, the of allowance the losses charge-offs. decreasing $XXX by charge-offs of the million of than pay the portfolio a ratio The end These originations for end more in our credit quarter and of Turning balance from In outstanding favorable improved.

Now given lower TDR the to balances their the let's turn discuss decreased and TDRs. XX TDR Slide to strength modification downward prior-quarter, levels. $XXX continuing lower million due versus trend consumer to inflows the of

As we could reserve mentioned allow of TDR lower. in the balances the slower generation TDRs past, to trend

to CECL. XX Slide cover to Moving

to the On CECL day $X approximately we TDR the impact to recognize previewed in earnings taxes. in is XX% allowance range quarter a impact one the approximately approximately upper expect balances. adopted January after outlined We billion we to CECL and decrease a billion represents $X.X and the of end the X out retained allowance versus compared non-TDR this on quarter. last year of The in increase fourth an XXXX of broken which slide have towards increase by of

earnings couple the XXXX on for to for to points retained ratios. XX day-two decrease A quarter capital estimated based XX decrease on four-year CET first regulatory phase impact. an The of in a represent X basis the in thoughts

CECL models relies forecast an forecast and various and losses on assumptions portfolio on lifetime methodology Our other economic of based variables. the to relevant

of view of at portfolio, including trends, the several balance period. recent economic growth and the mix of CECL factors the our portfolio will the impact on heavily the sheet, depend each outlook end of The our of

lesser mix is Under we non-TDRs. a The the TDRs to our of than decreasing be in degree other benefit, TDR balances past. the experienced will consideration CECL, impact versus have still from a but

portfolio, for can prior which reserved Most similar TDR from over impact comes you the as increases non-TDR is are from XX%. CECL periods the very already ratio of As slide, coverage to TDRs X% losses. the allowance to just approximately lifetime see the from

in expectation XXXX. pace TDR is Our for to experienced the balance at continue XXXX drop that will we a than but slower

TDR of balances from As in be the the will such significantly XXXX XXXX from benefit levels. reduction reduced

Reserve how on on our underlying underwriting not last or a not CECL we the As assets. risk we change of does the to day-to-day practices, mentioned basis. profitability or we do approach call, our the market expect impact timing

XX, Slide compared the for to a up to quarter was flat basis, Turning full-year for the the prior-year X.X% from quarter. X.X% last ratio expense the year. totaled On ratio expense

continue ending one overall Turning securitization access number the XXXX we to liquidity for XX, milestone ever company. markets, in deep to first and in maintain of Slide the a funding issuer market, and auto wholesale the to ABS as strong our

five-year platforms SREV of us In auto ABS attractive revolving the to to this at execution our SRT addition in past year, brought our non-prime the funding DRIVE SC lock consistent market, transaction, rates. first SDART, and to ever allowing

first private were by $XX in ended included of with lowest SC platform. completed Subsequent in we and the public For of priced with the the and billion executed history of average in lender securities, billion, quarter-end, $X.X committed received the year a its year weighted which quarter, we the total billion in funding financings of $X.X drive commitments. well $XX funds to securitizations. the securitization subprime And offering billion ABS drive investors which cost

from Slide our quarter. CET XX.X% down was ratio to quarter turning X XX, for the Finally, versus XX.X% prior-year

As that Mahesh $X a shareholders plan our on capital very further remain offers a our to efforts base goal. toward more to tender to excited a working towards progress efficient return mentioned, commence with billion to our We continue offer. and tender focused capital we’re

or capital acquisitions the we like tender of impact XXXX, in and into CECL’s the further assess for any it's we repurchases, deploy through open the actions will cycle dividends, phased go transaction. to TCF additional outcome whether planning the As capital, offer, portfolio excess market

billion servicing $XXX and Before million platform we TCF. comment forward. SFO want our to platform with to I with be balance get servicing be it auto to announced we transaction in conversion. acquired two portfolio will The And drive portfolio on that has to in it as opportunistic key two of $X.X We're onto by transaction loan our December XXXX. fully on converted parts, deal guidance, our servicing the leverage end to this a portfolio indirect the QX of acquisitions I included briefly be excited The should didn't about fee aligns income. a priorities, going our and

years record other choice have in financial has This executed is portfolio the second strong SFO ways. customers. our conversion demonstrates ability converting the improving we is mutually with institutions to beneficial and two the in our post-conversion partner past efficiently assets track for becoming of and and SC of performance, servicer a

be the a first our benefits consumer is the unless QX guidance lending. strong to Moving performing refunds. will otherwise and the quarter, quarter to noted of My remember due personal first seasonally tax will to from for comments include relative quarter impact

QX is trend. and finance line net Provision expect interest quarter-on-quarter million in years We ratio expense recovery charge-off again flat than year's quarter to $XX lower last loss than points XXXX better, in be and smaller driven more to to other XXX prior-year expected seasonal net a relatively versus prior was performance. with basis income the improved by flat as benefit be gross

expect total to $XX We for of held $XXX the sale income driven to by other normal better million Bluestem portfolio. seasonality million be

I million. our will outlook expenses to minus XXXX. full-year for be now operating flat or $XX expect plus We cover

around slightly year. finance the income expense expect on taxes lower up X.X% rate to to XX% we the we stable be for charge-off single digits. currently For X%, The around expect interest a low tax full-year be XXXX be the than around and to net ratio XXXX, and net other ratio

Q&A, over begin call I back turn to Mahesh? we like would Mahesh. to the Before

XXXX Thank you, Santander was strong year a Fahmi. In for very summary Consumer.

levels, performance While uncertainty, healthy. the at been remains continue see and historic watch is historic consumer remain early job there's indicators we anything some all vigilantly not The to alarming. and recent Unemployment lows strong. to market U.S. continues of auto do our market and creation

XXXX. remain generally headed we positive into So

in I $X.X donations operate USA we made and Texas, we the Consumer We significant than million awarded with more which communities Mesa, Foundation, in Dallas, want XXXX Santander across sponsorships. to in note grants, Denver, strides also the Colorado. Arizona and

associates completed hours our communities. impact in more our a to XX,XXX of positive help than addition, service In make

detail XXXX a few closing In points our efforts. to

fronts significant risk are operations the management Santander on First, progress experience Consumer last market, many has our our over smoothly. made more running years, fine sure competitive tuning and few in and making dealer being the and pricing improving

results changes the XXXX are that results. positive we Our leading made show to

and Second, while we expenses on remain volume increasing disciplined balances.

today of Fahmi time I lot we building here is deepening team. and and our example of a a So being spent great that. management

Our point operating by SC that standards. background management and strong team today broader company financial the major towards that speak in banking continues the is also to push a a results institutions run to with

on value. Finally, performance originations of to reflects we I'll work support call partnership and to With ways that, work mutual create together to continue new find our to continue Operator? FCA the hard the open to our we questions. very strength our for partner,

you. Thank

will open for Our Credit [Operator question first from Moshe questions. call Orenbuch comes Suisse. the We now up Instructions] with

Great.

kind FCA? they're that is your level Like what's kind higher rebuild of are of with do been that's Chrysler, So with the more bit overall that you out flush competition the likely a to in about decision? there that that made maybe leasing. in are to given could Hoping going kind of kind plan, things of to on you respect that a that and help who comments you you to competition? seeing stepping but going -- and discuss And little how of discussions taking little volumes are

the Yes, thanks question. for

So the leases did drop year-over-year.

FCA of a dollar slightly standpoint, $X.X the we levels mentioned, from did originate quarter. it we from Part of leases lower for generally. billion is, As

on competition mentioned lease. You

lease only the on know competition think of leases. FCA national other most relatively people small. I a is that who couple players There's do

of some share. into We also have competition one in really stepped credit lease. in other, take pressure can the or have from But country seen in lease, certain regions movements, significantly aggressive that that price way limited any unions the given

programs come we program to January and I competition And for do come partner, consistent largest think seen FCA year. I've we've far. in put maintain month-to-month, the more we vehicle-to-vehicle, and reminder, have a of still some still leases it, as out we go As the back have are share start that. does a of The by mentioned the volume we we in our but -- to and

Okay. a as And question. just follow-up

tender As talk the it you the think and you the to relates tender assuming cycle? offer Can about the executed. company CECL post how and capital position into that's about going and the next of

leaving share year planning every dry for like capital we as just we plan have cycle did the whether the the make sure much portfolio for seeing But repurchases, this do come best year. going in acquisition capital, plays have as of then car use up business The losses early the powder determine absorb like prices of other plan. as we'll that we obviously environment. look itself cycle, going in the used capital tender excess after that Yes. any benefit macro to some or as it's and of its that phase through may into goes we the business. we CECL have execution kind well is dividends the the quarter. submit or to factors want forward, in we if can in we'll that, impact for reinvest And We'll the do next before through well XXXX evaluate the how the stages strategic this out We'll our how planning how at

shareholders. authorization. announced did plan, strategic still was So corner. could CECL the around capital CECL excess do we like execute and a and for We as the change we when billion repurchase knew felt plan that share $X.X return to absorbing things still We reminder, to still portfolio our acquisitions have the

as over weeks coming we'll XXXX for next for we So our plan next months submit assess to have going the couple it of and forward, approval. capital the

thank Okay, you.

from John on And next Jefferies. our Hecht for move question with we'll

taking Hi, thanks the for questions.

margins. Just kind of focused on

side, we've rates that yield the versus be price average down I'm come year-over-year. the of on competition? how seen much So tied to would mix wondering versus

bit little quality, a competition, performance. a and a the -- It's it's that all a In we of better see It's as of from to segments John, of be competitive. really certain little risk A little mix. little a above. our feel bit bit us credit you bit lower of can Yes. trying more

cost general, So our when of told if which is percentage is in we Lease yield a I as at is total of into lease continuation story of It NIM our you year-over-year. last look at quarter, outstanding lower assets. a prime net it has the and plays our interest Part the also in look therefore, growing balance. product, debt. the income, non-prime a of

debt year, we Our has it environment in lag the portfolio. basis XX was down better playing it's cost a points have than But throughout believe ticked the in rate I of through QX. interest the

benefit still it and more we rates, haven't to of the seen of in the see we XXXX. So expect full in drop interest

So one of addition part The balance you a have for down of mix. also of is like leases And retail reasons. ticked to bigger sheet. them, couple yields in mentioned in a which assets the being

that segment, a that great not although partnership volume. to the our for most XXX% coming has continues increase, take prime So as been FCA SBNA is prime they do of in penetration of us,

it spill does what balance we the on over Some retain of into sheet.

that it expect down come lease of trend to in And I've in has part bit that on little other is and The gain XXXX. over mentioned XXXX course really the sale. of we remarks is, a the continue our prepared

lesser such, And years, remarketing of origination. the we've gains contract lease at and well set we've the we on this of We recent as at the and get used car lease lease in again, as XXXX. in a for towards was gotten on years, turned things. time it's much back income prices few a better efforts so is. factor last planned sales at when vehicle end we but it's things. all that as lease end combination Still One as have recorded we end, really better the the a for value predicting is of the two where over those degree what how fluctuated in And had than is prior experienced smaller and of as

income Thinking XXXX. commentary your guidance about your for interest net on for

there of and course it -- opportunities I in on moving of are Your of the be I is year? the forecast. of capital. cost pricing margin given parts there looking a our like band any it interest feels we settling part commentary it over think the of mean, is the in mean, should kind at net the now? Or should migration

Yes.

slight you as down. I a think I balance see think portfolio bigger becoming that the a of leases as you'll bigger, see grows, part tick

I think to what we've outlook. guided in full-year our that's

line single top being up digits. So just low

you about at quarter the fourth ratio is thing to other think TCF the look the when just portfolio. The for

portfolio that of XXX and near-prime is average kind So about prime, X% yields. FICO has weighted is around

a $X billion portfolio that you'll at those little the top contract bit. over yields, lower just as see been portfolio a line has So

Thanks much. that. appreciate really Okay, very

next comes question with KBW. Your from Steven Kwok

taking for questions. thanks Great, my

Just one And Santander offer participate is can well? the around that the also, the you're buyback Is first already ability to there price now. that stock buying given in back? right the where tender Banco raise range as the

Yes.

premium and the the itself do to participate investors a investors is a benefit the going them, but range, can your to it, offer option forward. the of in Can't to short first XX% choose every participate, participating for end much the question, It's offer. choose Banco not other amend on earnings it. than answer to into choose we The tender them So closed the they use better question you That's have those SHUSA going the accretion plan around to like it's anticipate who we tender, an will tender participate. option extend. not not to that answer in and for And but we do other of what say have the receive us who they receive available Santander will offer if we the about just the upper yesterday. to

a So shareholders, deploy we positive think positive a the to for that the for it's company it's capital. transaction excess and step

CECL flat a $XX thanks. relative just to like million impact then better quarter the are the in to first as And of -- guidance? much day-two Right, follow-up you that that how incorporating around

Yes.

in So it's in for we versus what quarter. QX first around expense with last provision guidance CECL I smaller will is or related The is function in much net the charge-offs impact guidance break in given is But -- saw much the versus given, really gave doesn't QX out to the we've provision guidance don't where came QX. expense the provision in we've that year. that that QX, we pretty is The QX in CECL line expense. we pretty say that a of total the charge-offs

XX%. were of XXXX at So the over in over starting point where we in QX of just a just little X% compare to that QX

will QX did experience last it from year to year. this like QX drop not that So we

for Great, thanks questions. my taking

from next take And Cyganovich we'll our Arren Citi. question with

Thanks.

pace starts that than the around at going XX% like looking should Just a over to your it's and I be that come TDR? of still at expect know you kind TDR next the you you down this think XX%. versus of to year. last your allowance do that's the What's commentary, CECL be less guess, kind couple looking of normal said out to of of I benefit, years? When

Yes.

in it discussed stopped else assuming throughout drop We XXXX. we've expect on think to an exactly flat trend be the will of anything to giving estimate And quarter-over-quarter flatten in out. in do at environment stable the the and TDR XXXX, I start kind stable. out, some think point then when we stays it We've past. should it

billion to sort is of TDR. $X accounts TDR then mean up is down year. are is a payoffs, new into There the ads, have TDR, One and which three we Yes, third probably I go some and which charge-offs. going elements to through and other this inventory, the the going is is

as expect TDR the TDR. be says, new difficult Fahmi unknown be now and XXXX. will is decline right and this exact impact a it there, little there to into third, the But and third, third entry we overall balances some a quantify So because a big to in about charge-offs it's obviously, the the year in payoffs,

talk that And you bit bit you make a than Is the predecessors? about that just of company the there parent a looks strategy? maybe to then, Do little It's way intend to any to XX%. your a company running about intend could odd little changes is the reins any Mahesh, alone, differently taking of run under like buyback after over CEO. any you

pretty running both well company of here I've member stuff as Scott bunch in a the the Yes, with as involved as past years. two Board closely, over of the been for a helping

I think keep Chrysler as in to this area. -- focus includes is being being to that importance continue in subprime of as prime for both operate we the And we area a relationship the where our well of is to space. lease full-service best, provider year as be Chrysler And this what near-prime the course, the and to do in space priority primary which -- the our the year. big maintain in going

car have going economic So cetera. the of which close into XXXX, to a that prices, indicators, will about be our obviously, keeping other we fundamental some like be used careful strategy eye et on

was kind sort some are Fahmi we've of of in to values terms where of as saying, sweet hit going think terms end spot of, residual our in of I these up. predicting

think have which, primary and strategy. continues key a be importance. that the area and very question the important no is the fundamentally, out. this area sort also Fahmi got for serviced is highlighted to other, obviously making control answer to and kind figured running of -- focus we've But of in Chrysler sure that profitability, focus year. change of program others I will is the And under it lease there us we our So for as of be bank your

Thank you.

And we'll move Rowan on to Janney. from John

Good morning guys.

and quick question, if you out between quarter? deficiency And that that a took Just a the noticed auction the the was? in in was there so, of that And chart the timing if the I auction-plus. what deck was wondering I sale difference shows

question directly, QX we a on formatted to we auction end did But deficiency we as in have Yes XXXX. line not only. the didn't that leasing your item up in answer presentation, sale

comparison. that you're quarter-over-quarter seeing So is that fair a benefit

vehicle just function higher And of the Is in the early expense the a weakness that Okay. in quarter the remarketing a quarter. on reported just you follow-up, leased trends?

I the more gain what on flows point of, used would it noticed sale the see on more that gain than around through as come. in that's mentioned it sales softness was where the in you'll expense, it and The lease market. lease lease I we car what in to recovery

you. Thank

comes question Jeff next Morgan our Stanley. with And from Adelson

there's you we I'm just Good running seems guess, asked. the the that stabilized, dig in reserve insight could once about closer I XX% just TDR provisions still -- it the XXXX, your any wanted going that a quantifying questions to range. of as And if that that the into to stabilized? already ratio better. extent through thinking to impact. wondering my Most morning I the XX% to reserve bit I of of into on should NCO X%, TDR like day-two give day-two just guys. been looking be have kind little But it's impact? increase is the the forward ratio guess, more need But guide thinking obviously, reserving

year for do for the we to be didn't guidance around I impact how is give to provision enough into, give Yes, numbers. transparency But the to enough data attempted it's going specifically we'll people expense. think points get

impact It's numbers in two the going drop. TDR mentioned ways. One, I to really the

XX% benefit something get to to XX%. we used going to from going is to And so the closer X% XX% to now

so happened you then the experienced it in difference XXXX. TDR you that if XXXX, we assume can benefit drop versus the in the again calculate that in XXXX, And just XXXX, in take

don't growth. we guidance had give is growth We the if but that XX% component XXXX off. and about coming years, top of originations, versus you think X% that other as around well. over specifically balanced in on two XXXX around the XXXX We're in last growth we have experienced increase The we've then originations in

But that hard it's to think to sustain balance that were competitive flattish going just unless the up. we to to Given the something assuming and take growth we're we originations the intensity changes if in be mentioned, in the that XXXX, competition slightly experienced you environment. that able

XX% ratio assume XX% balance that take versus had growth we a can ratio and a coverage You in coverage XXXX. that

you of together, And you so, impact. kind get those day-two add if two the

of heard the just to XXXX I any That's might car it. trends? I kind in update able Got if to helpful. used just And quick be was don't you on I on XXXX the think for a for commentary follow-up. prices. outlook relative an then us wondering give you're what looking

Yes.

our a bit of the prices. and used on recovery did on what what's rate constitutes underlying car So car an we on used trend analysis little prices,

CUVs us the on. couple is sedans a between coming into these to coming for value. the shift CUVs. going But the sedans higher car used a a we're and That's beginning sedans mix recovery SUVs, volume. there's and So of -- positive sedans are One SUVs into sort are holding market more shrinking notice and things is of because rate

moving good So us a a segment giving more higher us because that trade for recovery that's is we're trade rates. towards

are in cars, our more going is prime that and as exposure -- into thing and charge-off. financing bit shift vehicles more age mix cars buying a towards we've The recovery newer higher are rates and new of as on got of that we new second of because they're pardon support because far therefore vehicles, a concerned. of terms me, with going shifting more the get And we're

as a that support pretty So considered this and recovery to to prices are concerned. confident as of goes I'm and degree I'm recovery we're into our going -- pretty our of what continue of car far it. being all see the used rates, reasonable and sort constitution XXXX, of rates

Thank you.

Kevin from Piper question next Sandler. Barker comes with Our

hoping the a Yes, post-CECL view to how in CETX XXX on on basis mean, could decline you target of I basis, a fully you CETX discuss your phased-in -- just CETX have points I world. the you're going was nearly in ratio base ratio.

that regarding for if regulatory you to had would be rating you reset? any the conversations bar agencies And potential targets CETX? then with agencies So and expect

it's Kevin, a question. Yes, good

we industry, normal have new really something you of CECL used through to as factor general, year trying the going and ourselves, and in to I CECL. life the is it's It's think consider figure the implement start with just out progress to another getting forward. to how

I the the capacity loss-absorbing received for but The we CECL it same. think haven't really impact, Theoretically, could company's that is guidance we reduce under yet. stress

the just from other We’re to line line item. item moving one

the However, doing we're still of capital the early process our cycle. of in part stress our testing planning and

couple we or before, we'll changing that our keeping As whether over capital next combination same. assess mentioned them with targets the be I plan, of and the are our strategic weeks determining

primarily so for opportunity CECL that higher shift expense, the the Is you especially quarters, most in change the XXX impact decrease quality least towards sheet? balance moves, appetite? credit then given Okay. are FICO distinct about any provision And that of makes score. your loans your competitive better of most impact a recent at just recent, around the credit because you the move seeing to Or the on in given the of there

it's related. Yes, CECL not

credit us, twofold. we our would and basis on a equation. the into quality increase For is really to assets in really continue I say doesn't economic price come lifetime CECL the

and risk-adjusted driving our margin I competitively achieve think positive by we better can at dealers. being selection the priced

it. one component that's So of

FCA. new more those with comes we our continued be rates of is and volume penetration tend higher the The way, continued can The offers to component exclusive progress in increase assets. get FICO with other and just FCA, more it our our

taking Okay, thanks questions. for my

with And a we'll take question from Caintic Stephens. Vincent

question guys. the and parts. Hey A about usage morning thanks, capital good two

just there's more you executed, flow outstanding How's gets that think I'm of see the TCF? of every might portfolios offer $X to interesting rest tender public public do free you. you of remaining cash similar with to pipeline still $X look the the the with you And just tender good year. a great about first, just there, what anything And going float? any prevents when if So the you auto generate from that offer, lot kind the billion forward, after float wondering did of to acquiring then Thanks. separately billion

Yes, of comment I to post-tender. really it's about kind premature think

launched We the haven't yet. tender officially

we'll how see we'll as So from of our capital as go. year the go it and far there the rest executes, actions for

part second question? Sorry, your repeat you can of your

Sure.

to look acquisitions more potential of you, did similar with pipeline on Just just auto the is any interesting you might portfolios that what to Gateway? how

Sure.

years. track come either think the more asset we So more we at onto are differentiated the capabilities or and them. we've that, more doing for like our able way. reaching to lot do And And able acquire we demonstrate other have servicing us. are the be people a get do convert solution for I portfolio our to a been financial just our record of servicing We institutions feel and couple portfolio to the of out looks -- over last around has have to platform

case, reserve the question standpoint, and maybe to we from we auto sure dry opportunistic when asset enough your people Going drive to other losses. about around may be come upfront our if And class will to for have portfolios back lifetime direction. execute want and our think them. it our make way as But that's whether more portfolios come powder an CECL, want those they to to

discussion. Okay, great. price one car And on used just the follow-up quick

very as that flat to a So Just fair confirm that so assumption? been keeping Is so that has Thank would strong. XX.X% -- would expectation -- an you. that? be to fair it the just wanted be

year, earlier across was throughout us, And board. Mahesh or across for or it's the mentioned it story you should mentioned, or -- tell that around Most it X% the this by really the vehicle outlook. people and been up types, Yes, vehicle year. whether we board it's recovery as be car rate It's will year, price were age. new Mahesh really used but saying time it channel this to down positive used X% last a the

do where today. X% at expecting not that big a forward this think moderate to again We expect We to to X% we're drop be are versus year. it going it's people Going drop. do of

expect that they or Power be J.D. down it think out forecast put to I points. a XX and NADA basis XX

down range a I is estimate. that to in X% reasonable think

great. Thank you. Okay,

a take with from we'll Research. And Wildhack Autonomous question Rob

Good morning guys.

you a any the Gateway bidding the to book characteristics that that deal. acquisition One competitive there on Just out there? Were process was us attractive you? particularly give or sense how for stood of as And the can

us. attractive specific about portfolio anything that there's the made say wouldn't I Yes, it to

to I there. was an comfortable a near-prime, We originations portfolio prime the get think we level. buy could able attractive it that at with were

the I did portfolio. guess, transaction, thing, that say is of seasoning would One the the benefit I just

exit business XXXX. did towards the end the auto of they So

So it I being forward. being partner in expectations was loss on our a then bank But also for also allowed more attractive I us comprehensive them really hone us. them. a think going mentioned And solution seasoned portfolio, again, to to

itself, portfolio something the it's indirect to well. specific auto, too very nothing it's know So we

bit prices, rate to car you opportunities but recovery you've that Got rate prices, just more, of things internally? a on the be processes recovery more of or improvement And impact you've can it. the recoveries much improved independent going used the attributed how in that And so of changed then the support there forward? car talked internally can used about are

I it a mean earlier. about Yes, we've little bit talked

that and I is are the strategy as bringing to obviously, the shift involves other more repossessing is age we said towards -- cars, is this, therefore, of of are prime shifting mix and our vehicles One newer the part new attributable vehicles. in of

that's modification Other that out doing how in extensions have programs terms borrowers. we got and operating the operate sort repossessing been efficiency, trying make than sure good for we our ordinary. to that are of that something it the constantly working It's nothing we're efficiently the and of right on all of the there reasons time, we've some for forbearance but minor we're in tweaks that,

than report these So constantly fact more really on other processes process significant to is efficient. working making the there we’re side, nothing the that towards

Okay, thank you.

Thank you.

at comments. And Mahesh call Aditya there final questions no for will now further the are time. turn I over this to

Santander So in thank interest your call you for the everybody much, very and joining for Consumer.

and Thanks speaking to quarter. to Investor Relations again a you next we follow-up team for look be will questions Our available forward lot.

conference. concludes We today’s again, and today. that gentlemen your participation appreciate Once ladies