Santander Consumer USA (SC) 29 Apr 202020 Q1 Earnings call transcript

Good morning, and welcome to the Santander Consumer USA Holdings First Quarter 2020 Earnings Conference Call. At this time, all parties have been placed into 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.

you. Thank morning. Good just team, I call, say behalf events. on on To you wanted to the yesterday's given thank notice the everyone of short begin, today to that obviously joined and appreciate look We flexibility forward a the Q&A to end. at the

call the Mahesh have Karam, we and Aditya, CFO. today CEO, Fahmi on So our our

and certain encourage those course, SEC know at reference useful our U.S. look certain today's investors. we'll financial filings As also to those non-GAAP made we you I'll We'll call to have the Mahesh. to to that, maybe filed with factors and we those turn you on are statements believe over And forward-looking regarding the yesterday. statements. With a of and we reconciliation GAAP call measures risk presentation of probably

and good to joining for everybody. morning, And apologies for quarter. Once us yesterday. glitch for the you, Thank Evan the thanks review results our again,

that by start those me with by saying our COVID-XX. thoughts are Let impacted been who've

people who In medical for them. are responsible the particular for caring sick, and professionals

the appreciation to cabs way keep is all harm's put in deliver themselves to make day every establishments, out sincere and sure buses, running, functioning. drive essential goes and those ambulances, who Our company food,

our customers to empathy time at them workers customers crisis who've are are of for showing Many essential find by a and these that and to we Santander And like the there made our center to in who this of for extreme call colleagues want proud I'd solutions. know forefront them. here is thank our willingness to stress, us of a and them, listening being

operate. we've in dealers our our to unprecedented to draw reveal response we communities to your our Slide crisis like attention to the critical the customers, which X measures taken in I support and employees, this to

a deployed employees, Thousands massive our step. our to laptops for customers without than to are serve order technology a working with weeks few home. by employees Starting of are effort of and a missing operations matter our in XX% a leaders. in from us of more to information our Thanks continue team

clean in and further For our to to measures be safety to jobs that increased ensure launched emergency leave require families office, each employees the as their protocols at childcare employees program a We steps make as for distancing as workplace arrangements possible. of services. keep wide could that we've paid sites, social our time the firm the such so have necessary to taken and

colleagues frontline stipend all a and Lastly, to we our a tremendous resiliency to during period. this temporarily of our are for providing X,XXX employees finally weekly their thank you big

Next our customers customers, and deferrals for as during our of suspension the seen of from to loans actions late we've our you a series charge These include announcements, expanding crisis. assist repossessions. temporary leases, involuntary have this waivers, payment and previous implemented

assistance significant the provided customers our loan the to have extensions pandemic. We through since financial beginning of

XXnd, executed modifications more have loan specifically April of to this As we crisis. related economic than XXX,XXX

we month. context extensions to were providing loan XX,XXX XXXX, approximately during per XX,XXX For

practice. recently While the for are standard due customers modifications significantly loan at to our a a level crisis higher

long of in assistance a hardship. record track of have financial We offering times

past. event to for implemented and in we initiatives COVID-XX with are our The single customers quickly and to through experience disasters also execute uncertain natural response tools in times. customers the our have We assist the have large to forbearance due these programs line the

and as areas well instance hurricanes impacted Houston as most recent of surrounding XXXX in in of Florida. the state most The occurred when

executed extensions areas. we significant a approximately customers and of our affected and those Texas have Florida in XX,XXX percentage We in

are have appropriate customers While providing lot have customer in. are the a from and confident time actions financial the broader an are clearly servicing operations to we experience we COVID-XX we assistance our centric than impacts are that disasters, taken natural and team of for recent the

And their is high A payments. not have due could forbearance normalcy our time our are not we Based availed the a on point any of rate of is have of once past past. experience, accounts believe request, them worth who restored. loan the that requested of these in during have mentioning pandemic this at customers majority cure of assistance most a

potential FCA deferred for XX FCA customers, Chrysler Chrysler first launch APR with for zero and on Next, including our dealers we select months partnered selected programs and XXXX have models, models. Capital days to payment new XX payment FCA in XX

interest plan to and plan and And off deferrals, XX cash to Bank has days models, of term lines term up of The used loan Santander credit curtailment interest vehicles, and relationships, floor older for ability new free loans. flow and offered and for floor deferrals vehicles deferrals. principal one our older used

the of responded Senate the assist government, during have Treasury, the package Federal Reserve, and this The and urgency launched historical Department our Americans crisis. with Congress to fellow stimulus

solutions would I customers. regulators us for the facilitate Specifically, like of to helped recognize rapidly support as our they our

million communities will communities, financing financial by the $XX million institutions. Finally donated hardest has vulnerable serving hit in development in Santander provide populations community crisis. for our our organizations, SC U.S. $X also to to

in turn our disruption financial by Let's in the the prior the our virus. QX to Slide performance performance. year, to of and excellent was the strong continuation an headed discuss X a XXXX Early quarter caused results to to

in a to start New are prices and February. car strong vehicle and sales January good were used off

as pressure in to to the first began the Our results. some pressure mid-March that quarter reflect began and business for our highlighted results quarter in of see the

loan quarter economic in the loss booked by to million primarily During reserves related factors driven $XXX COVID-XX. we

than quarter we line with line Excluding these estimate relatively to provided slightly one that day qX was reserves was net CECL XXXX. better in estimate last income and our in the

loan life Jan historical mentioning the our on CECL the reserve and books. X.X% XX.X%, the performance end allowance loan discuss the up ended economic of on and the portfolio post with will losses, significant in by ratio the of to worth quarter We XXXX Fahmi inherent reserve XX.X% implementation. accounts, our from loan the underlying XXXX at of determined the of assumptions to an that but it's forward are of two drivers over view bill X, quality

XXXX. the year shelter during strong applications to press were relatively began Originations decrease originations auto and and when QX the nationwide versus quarter, flat billion volumes. place mid-March until orders started total $X again Our

Prime a decreased. increased loan will and share we launched billion with you in also by programs program non-prime new increased driven more to details provide the originations FCA increased volume shortly. as Bank. loan to our February $X.X volume Lease Santander and slightly volumes with Tammy due our strong however January through

[ph] quarter to to sell the we with better During to Broom also and a end buy a and vehicles. end relationship multiyear way strategic platform preferred designed used innovative lending offer announced ecommerce

to financing. supporting make And been it have since easier customers all preferred obtain We for new Broom this XXXX. relationship of even credit profiles will Broom

net to basis Both QX as on over of and still delinquencies the we're the gross better points delinquencies. of credit first well off early quarter Moving stage year. to ratios impact pandemic, rate the while stable and recovery improved our XXXX. evaluating increased as performance by versus performance, XX charge our year was was Late stage down

over include effect more performance have And were that downturn short impact and expect Factors only term this slightly the in quarter. we credit reducing Most will by coming the credit the the moving could loan delinquencies stressed forward. months. of metrics be these impacted to charge economic which offs improving extensions, metrics

lots used vehicle used and remains activity will recoveries. repossessions price of And care reduce as declines suspending cars dealers auction Temporarily their slow.

that expect pick increased pressure cars used start, the up. and there once demand downward will to also supply an repossessions We back on be subsides until begins

going credit our are the determinants performance important these forward. of All

the During end the the ABS issuers quarter of to quarter the Santander executing and Consumer ended, March. demonstrated funding of the transaction After beginning crisis. securitizations to to a one we the were additional new access at execute of liquidity accessing since first

broad. month the to is shelter place like would last our time Through some and decreased we've brief XX% almost I seen application the total due in XX% trends decreased the and a across demand. April Given of April of versus XX about count weaker orders, year approximately provide recent originations to closures same review total us into dealership behind our

and closures in also we suspensions lower recoveries repossession have Due auction seen to house April.

time For auction our approximately XX% the have sales down year. in same last versus example, April gone

back However, are some to the business be green we beginning shortly. of in other the auction shoots picking will Fahmi week. our And across house activities cover see seem up last to

we During our crisis, this care for for take employees if care teams safe. could was our success, and goal position them knew of customers. We to turn keep our will our in they

seen that's exactly Fortunately, out. we've what play

for post in During mid-March highs. the saw a results hit call of initial assistance, calling surge experienced we as record customers we survey

times points were and customers team last greater extended points most. satisfaction levels. stress four First, was our during more our customers than with hold Even the when key about than our they XX has been weeks needed to previous feel how there the percentage the customers overall Two from us; service significantly evidence

rate post of performance plans the just Second, our employees as last very has over and response In in and been doubled handled for proud seen weeks. it well impressive the taking we've easy, several that continuity is teamwork call It I'm the the not last by our our summary, business the worked. fall. displayed and survey we've but

we by challenging robust innovative we slowdown. that times ways confident We from enhance and continue capital liquidity, help as to teams and made absorb further us economic progress some and together that effective our which to still reputation. supported headwinds a customers position the find confidence last weeks, few identify our over our we these I'm ahead. strength abrupt much come this brand can gives of and And As will to enter have

economic been We've cycle years. downturn potential end several for of for preparing the

we've including and the our progress and management particular, risk. three credit improving Over past framework enhancing operational risk years in enormous our made

and the invested risk added deeper about gives population. and quality in talent which data door to organization better advanced sources understanding We've through high tools a us our and

actions Our portfolio analytics 'XX. and improved through better quality of credit XXXX focused has and because

less that We duration estimate and severity. better that crisis market difficult share with than are to it's and profitable others risk. captured eliminated still and months some and very perform the We're its into of segments two badly

bank But to unprecedented encouraged impact provide depth yet and the are the the of of and small relief uncertain. actions government regulators by the the velocity to and as swift We businesses. individuals is assess by to economic difficult and taken recovery and

over will call a the Fahmi results. I of our detailed to that for review turn With more

good and Thanks Mahesh everyone. morning

to the wanted are quarter's who the into by recognize also many above to help I and I our business Before the challenges pandemic. employees everyday customers and going get our and our thank beyond presented performance, address

dedication solve and functions get job with all the to I've to done. been put across work, the the contingency teamwork to impressed plans new issues

Now some indicators performance. for turning to that key economic influence X slide our

the page this on metrics strong. year the started off quite All

and economy, However, along since continued Americans consumer COVID-XX. our has with local uncertainty as to the impacts recently labor as the of due and assess the confidence federal, result, how we the macroeconomic last a has spoke environment state significantly deteriorated has businesses millions pandemic paused forward. best has caused move and outlook governments, in from changed market to The for for

factors government support the US be crisis key length impact of the and stimulus and of the The unprecedented economy the impacting and the will severity programs.

include contraction, Specifically business the growth for used prices. our drivers unemployment and or levels, car GDP key

loss there order. closed new sales in be a on Various those US nationwide expectations. Along forecasting slide the in few sources many place Annualized dealerships car in car new significantly are performance. shelter down from are and severity, fell to March factors original were lines will as key our X, significantly sales that industry credit due influence

vehicle million units March. price deterioration XX just the for Current Used indices did above significant in not year. estimates report are

April However, year providers ago. vehicle the showing of a performance have to previewed some period used same XX% decline compared in industry one approximately data pricing

providers start Typically virtual auctions. were pandemic, of physical mix the large virtual a only the of auctions of auction and most At the bidding. are offering

and pandemic However, channel auto have of shut In worsened, virtual access severity now recent entirely. auction as the of auctions to utilize. reopened weeks, of the we we the down sites many the over were XX% the has

with In led auction vehicles. of negatively in to many temporarily and have Both major the auto charged repossessing addition, uncertainty impacted we, other factors suspended lanes off these along pricing. lenders have

car used last future of extrapolate to based couple on difficult the performance. is prices it interruption, this Given weeks

by virtual the a of However, reopening step. the as encouraged first are we channel

recovery and metal Our nonmetal quarter. deficiency sales the rate includes bankruptcy proceeds, and was which in XX.X%

and rate recovery discuss further will shortly. performance loss We

versus slide Mahesh this to trends, stable X for of quarter relatively origination Turning XXXX. as was QX mentioned

non-prime and prime was to decreased Capital Core quarter. year between Chrysler originations originations XX% compared story volume loan prior the Total X%. the increase retail However, loan mixed.

economy impacted over year in XX% QX Chrysler decrease increased by exclusive increased volume of Capital negatively prime approximately by and year disruption half the Chrysler the and Chrysler dealers. year. year driven FCA. XX% volume by last non-prime lease were year, over X% the offers Volumes of originations versus our closures

basis particularly on of to are in in in thus We over XX% non-prime the more expect Application sector. the down quarter, year across decrease far the a our channels counts second continue than non-prime year to month April. volumes

last spending tax However, seen have a significant over as are refunds and stimulus uptick in dealers the checks. consumers begun to have we week, applications reopen and/or

prime side, originations FCA to supported are generally Capital. Chrysler programs, the On which by Incentive are exclusive

demand, penetration in will driving the and rates we incentivize believe to prime our As are origination increase SCA consumer second programs continue quarter. our

volumes have These the over been significantly last weeks. impacted also six

Our originations markets by and have Northeast hard the hit where somewhat key are lease the concentrated in been virus. several Midwest

on time an to financials reserve depend over an year. year-over-year. and will our increase than the net key April, interest more applications in I still our below earlier levels have albeit this Early Volume seen non-prime With similar XX% the will week, through mentioned lease we were last on have and drivers impact down income last the balances. segment, well

the addition during of driven the In and will competition macro volume to by be out crisis. backdrop, the level of coming

to us competitive a underwriting We advantage Our times. in enterprising believe built weather approach standards downturn. will our focus a non-prime give these are

our risk and remain focused continuing dealers. while on our serve on achieving our adjusted will the portfolio returns and right supporting We to disciplined customers

continued auto we see results. page to FCA temporarily Chrysler into dealership U.S. in sales pressure This FCA observed on down closures you have March. along plants vehicle to manufacturers late March and with their April. downward the since Capital Moving auto pressured mid can X, has including have shut and

partner our the launched However, we FCA while to to with XX% quarter originations FCA we with our deliver of penetration and solutions finished programs drivers rate continue the with penetration the The program. a to we Santander increase as customers. year-over-year Bank rate

consumer penetration As demand drive the increase mentioned, rate near incentivize likely will offers term. our in as

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

originations quarter, the $X.X platform our added via in we agreement FFO Bank. billion with Santander During to the

In addition first acquisition balances. in in the successfully TCF converted million quarter, to $XXX we portfolio our own approximately volume, prime announced previously which included SFO the

platform this for in generated fee Service million quarter. $XX servicing income others

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

on positions new During the a SC and well scale crisis last our We servicing to than us assets platform. during our leverage crisis, $XX track opportunities billion onto more of post converted our capitalize platform. record believe any and to

expertise a a in servicing of differentiator is recession. non-prime Our times

to of market Turning and of XX foundation us in $XX supporting liquidity to to and customers slide billion end, and liquidity, volatility. SC of strength of these continues to and originate continue as for quarter SC during leases uncertainty a source had a times This for total be liquidity. loans the

resiliency has In on strength liquidity At and and of sheet. the SC or raised third-party quarter, billion balance the we of weeks, in end nearly XX% had STRATEGIC's demonstrating wholesale the available billion approximately capacity warehouse renewed unused our revolving lines. first funding past $XX $X.X six the of

over a credit we line billion facilities. warehouse In $X.XX and revolving bank mid attained private billion new in term $X.X renewed late to March

were our syndicate, addition the April. support In to market strong the able the XX to in also from public bank lenders AVS access in we

our the were We we effectively of And with closed million strong transaction markets $XXX to down achieve support pricing. to so SDART of the first as institutional had better than the do We shut able one were since the transaction. the mid-March. been expected upsize investors, and

forecasted our As a business. result, can sources our liquidity support

At the an facilities. support capacity have of quarter $X to addition the have from continued lenders, our unused we end today and billion Santander additional third-party In credit through also our of Santander. we

in originations in the come term of liquidity capacity coupled crisis to position capitalize near the well out us position ready lower to strength arise. a of if Our opportunities with inorganic

versus Moving to the our quarter. review performance year XX to financial quarter slide the prior for

During to quarter, $XXX economic we the in by added million driven related reserves COVID-XX. primarily approximately the outlook,

March. expense $X than higher at income X% outstanding driven X%, by in due to Net loans depreciation limited on decreased balance outweighed receivables rates, debt of by and driven loan end cost increase vehicle debt as benefit decreased average the sales Interest leased lower increased of and in Interest balances. expense finance benchmark the more X% auction growth. slightly the billion

Credit Total driven for $XXX expense of up loss to included reserves. personal in quarter, lending to the last in $XX held COVID-XX portfolio. other with sale line the the related income CECL in million million adjustments of million implementation $XX $XXX increased related by million and and of was quarter the year

a now materialize year stage basis had Continuing increased Versus delinquencies XX, prior while quarter basis late-stage end. XX quarter, of delinquencies improved to XX as slide to points metrics on page most decreased the begun the this impact by COVID early year-over-year points.

XX.X% ratio charge gross XXX ratio continued year, The from charge the basis The points XX last from off basis performance positive charge RIC off points off last QX net X.X% QX. decreased year. we of decreased of momentum of from QX as

As Xst expanded Mahesh than we executed portfolio XXX,XXX in in more loan XXnd lease through to March. programs our deferral approximately Since March our our April portfolio. XX,XXX in mentioned, customers offer began we’ve and extensions

in majority XX% to extensions a have extensions in never The amount an to status of been the is prior extension these were normal over of past have that times in received the The the crisis. the and extensions never delinquency stage current given late month. approximately of to customers bucket customers provided three

execute our customary are and distress. help willingness ability as are extensions these as have have for And of tools well show developed we for aware, all some to part the SC. pay, designed to practices been to time. financial modifications customers you Overtime, servicing loan As and normal and well temporary for our navigate quite expertise who successfully consumers the

they deterioration. show track existing terms of if We for these signs to any adjust credit capabilities accounts and have

quite COVID impacts and unlike modifications well anything have of uncertain that years as experienced as can data for are normal leverage both of we have natural to the disasters. past, in performance course we do Although related the several we extensions

Going car demand as prices, including reinstating forward, extension well these metrics factors repossessions, inventory impacted several credit will the other levels, levels as used by our at auctions. unemployment levels, overall dealer be and

loan the versus were the million. in XX prior decreased $XX dollars average to losses Net figures charge million walk $XXX billion change, rate. decreased lower were due gross due to by million million. by offs RICs and year from which losses to in a the up for Turning were than $XX quarter recovery lower balances from slide These million which down charge last $XX and to to prior in Breaking primarily year, and review $X.X more year. off offset $XXX other million of loss adjustments $XX higher ratio

which and to reserves on at the and last billion our $X.X Turning the quarter, of XXXX an XX losses end increasing allowance end this of XX, allowance from attention of credit $X.X QX represents for provisions billion quarter. at XX.X% ratio totaled the slide

the one increased due primarily In in adjustment. billion $XXX to increased the due CECL the allowance COVID-XX. regards allowance the due factors an economic to The quarter day reserve walk, $X.X to million additional to

of estimate The difference in the increases pay overall balance, were million quarter's partially outlook. offs. portfolio by last as ratio downs between The from changes offset charge XX.X% driven by XX.X% call mix, versus due to is macro-economic primarily our such of and the decreased $XXX our

impact year use determination a three and at supportable scenarios loan outcomes constituted including with the potential end impact forecast of of and the period portfolio quarter. how our We reasonable several stress, factors degrees drivers forecast of walk as the represent our Economic the COVID-XX. and key in varying economic of

The In Manheim combined reserve, unemployment results $XXX the the reserve with the of million to key a we GDP, and the in the impact an increase for largest recorded economic to index. include derivable modeled qualitative which quarter. addition resulted

end, assuming baseline into reopening quarter recovery in followed economic the account on was had a programs. forecast latest government of year the of Our we second a in half the were steep taking scenario assumptions by based a variables available in economy stimulus key the and at drop the QX,

and variables mix economic portfolio. programs on The originations continue impact macro non-TDRs. will and to the for monitor consumers track well quarter, our the these stimulus second TDRs into as Going balance and overall as of the outlook depend we the of will the to level of and allowance asset and

versus slide to impact to we by XX non-TDR Moving loan by on have balances. CECL CECL XX slide cover broken the provided designation, out TDR

we the forecast assumptions models that our of economic portfolio methodology and on based various reviewed, As lifetime on forecast relevant relies other just CECL an and losses variables.

be view mix will at our of factors, heavily the amongst The each sheet an portfolio, trends, the the growth our decline impact outlook of of portfolio or balance economic other recent of and on CECL dependent end of period. the

our be last TDR we Under but on lesser As will a we in than the mix quarter, experienced depend past. benefit, from of versus TDRs will non-TDRs. the have reserve also degree decreasing impact the to discussed a still CECL balances

continue this can versus quarter see down drop you the to slide, from approximately As balance the TDR quarter million. $XXX coming last

of TDR one the the comes impact our related depend will portfolio, XX%. approximately than modifications. Most from level from regulators continued more X% non-TDR to CECL and of forward to on guidance extensions allowance which going from COVID day balance the increases the

COVID-XX TDRs. consumers the on delinquency guidance and as deferrals qualify Based recent related far, to of receiving customer not majority of extensions will thus status the assistance the

X.X% XX, slide quarter. year totaled quarter for from to ratio the prior the Turning from down expense the X.X%

prior primarily Our by driven versus lower March. were year the operating down in expenses quarter, repossessions slightly

XX, of Finally, liquidity, capital to internal to in similar turning our our excess targets. and slide remains robust

CECL million for that successfully and from guidance, total XX.X revised the $XXX the repurchased authorized begin Federal was XXXX. elected we process the Reserve at we our results shares two part related phase in to quarter, of plan. in the million have defer of years Further a impacts associated cost offer including capital capital During with tender

close prior remain quarter be this withstand of and quarter. $X.XX in record XX.X% than business still to capital May shareholders above XX, of on adequate scenario Our level declared The for per from paid limits. stress is the CETX share on to of more XXXX X post down the XXXX. year cash as of a has dividend severely believe ratio May to of the a was We XX.X%, adverse company

ratio We no established our and plans to our we XX% as our absorbing reserves at our given or as eliminate loss CETX reduce well the dividend to currently strong capacity have withstand of dividend. adverse conditions nearly

However, capital overall backdrop. and management we will the to monitor to macro-economic continue exercise disciplined approach a

For loss further from of represent on our as results our first our Severely Scenario quarter of time. The public DFAST capacity, XXX% XXXX. the absorbing context reserves end since most size at that of [indiscernible] recent in the approximately the Adverse portfolio has increased

at So are losses scenario. XX% looking the the XXXX results, approximately for under severely adverse reserved we test

key purposes, levels. We XXXX, pre-recession unemployment by our for to contracting dropping and throughout and informational further stress macro drivers elevated GDP and returning index returning XX% the XX% XXXX not to remaining XX% including back reaching Manheim XX%;

be XX% quarters extremely QX is and standpoint, a based we our above our current post reserve extreme of cumulative From capital planned severe minimums. all scenario able nine to stress reserve our this would over still in approximately Under of on make levels, this capital distributions losses be scenario.

To we environment, that our goals our resources conclude, liquidity, the team, the and to achieve long-term capital are customers. confident we and notwithstanding support have current

maintain event arise. appropriate to service continue risk loans adjusted underwriting while will they retaining leases for in sources initiatives opportunistic at disciplined the We effectively returns. We'll and of them our strategic

improving economy we quarter events, and this as begin unprecedented reopen. the states withdrawing of year. In second and for businesses for light to these to our the We look targets financial forward are

on consumers. the are has impact positive extraordinary We our an support immediate government that hopeful

becomes stabilize updated with more we will and severity the you length things the As and of crisis guidance. provide certain,

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

of remain line focused Thank extreme conclude In areas restoring will vehicles the time the our of are new of on months. important for the in for the you, business, growth. coming we Fahmi. summarizing by used to I'd us top like drivers attention and uncertainty, essential demand this

have offers to crisis applications quick levels vehicle which react the brought to pre-crisis to and April. in with OEMs have auto The financing attractive been back almost new aggressive

as to sales. in manufacturers promotions look to see market support We continue car to new expect the

Our and to the resilient months. non-prime through it several we business portfolio is most anticipate profitable and continue our will that perform next

stimulus encouraged still effects behavior. seeing and positive we While early, package recent of are are consumer the by

impact we Consumer will our and significant of have support record and Supply confident resilience a values. prices withstand these profitability the also capital demonstrated our play cycles will in has dynamics economic rates from auction vehicle demand these liquidity and recovery and values. parents Used we the Santander role to through to a track are headwinds. residual

these our unique the customers, In We dealers my partners most and team prime times stamina our and there depth staff. our our on amazing they the together of support to support rely creativity are management and OEM frontline and of importantly communities. and

that, open the questions. up With call Operator? for I'll

you. Thank

open with Instructions] will the call Micenko We up first go now comes Jack question questions. [Operator SIG. ahead. from Please for Our

loan and and average envelope, like if I Hi, good the maybe it the lease morning on everybody. Hope the of an feels a to XX% the sees everybody's XX% well. Wanted to drill take March. like loan rate into March XX%, Back amount a bit. take looks

initial prepared you be X-day fit I that wanted TDR it? about to TDRs, comments the to Just think your definition? think Is require extension to that color. would had some of And right way your said sort beyond there in another won't get

of the side, do lastly April Are March it on something plateauing that? the can Was how all now - about Was the And to think talk you then the March balloon the through XXX this payment? cadence it we payment? take? you

Sure. Thanks, for thanks question. the

longer. these distress. little tool It me does hopefully effective bit customers these to very So through them it that mitigate financial the, are, navigate keeps a help vehicles they're extensions believe first And let we a losses. say in their

had unit over you a or XX% from about a is the mentioned standpoint, the bit percentage From light. close think deferral. little that of XX% a extension to kind just portfolio. I some standpoint, it's of owned bounced We're count have

lot different the over And phone. very a We response to the Mahesh as give tools of or mentioned, online, us our been did customers reach has positive.

As call. far mentioned we on extensions factors depend of that a of key it as the on already level lot the the will

the decisions financial continue pay. end we're pretty begun The over a bottom the April, wave but the to obviously the to and ourselves, March of assess level down out. big is or trending the begun standpoint, has then so to solid for the beginning well line the we From trend as willingness week at their and request last ability make of has to going a pace in to consumer to of and slow as saw try

Yeah. And of most one the XX more extensions. today a are that, our day just after extensions

never they earlier, And either who non-liquid kick overall stimulus Fahmi expect in status. said, in So, for once the of to extensions go treatment self-kill second customers be kicks as from extension in round, we the an the be significant of a package extensions. coming in the majority before in, are a round so amount will once TDR of them into status, to asked second

Yes.

long the to going So status how be the will impacted impact TDR it's the consumers. lasts by how this, crisis and

So depends beginning the guidance March. the from the the which way on Federal the their on us of of COVID-XX delinquency Reserve really program, extension is works for our status onset was

not past a were current related in as due, COVID our So, than days classify if as or mentioned, less we they XX TDR. extensions will

That's great.

may around employment? this to couple I can in point kind Are any to your more because proactively well has a month? last points there box the prime. promotional activity. six last we're towards that So, real But change you you weeks a of tend then anything was do credit scenario, on verifying I how to that usually weeks? in the know changed up the mix under the over follow means maybe of know maybe captives

Sure.

standpoint. an with think going for to take I caution, and in I underwriting proceed think us from approach these appropriate yes, So, it's times, the that's to we're

to have appropriately get disciplined very on approach right that sure going that we're to sheet in for returns. take We for we and risk risk our price remain balance adjusted our make and we the the

course, going continue be to are we Of for sure consumers that and the support credit them we're that worthy. to dealers, to there make support

very the to it's all We we to uncertainty think So, do selective. and really market, there the our we'll given for be where want to but prudent the continue spots of on that. be in rebound really pick play, cautious, be

the to around of deal things have, utilize of some that to we you of try things filing we're those the as those going to And tool the a risk stipulations or income, mentioned all tools. underlying determine

of being, as caution time and coming for arise. then very the out opportunities the is be So, opportunistic think our approach probably I market best

Thank you.

is next with Suisse. Moshe Our ahead. from Orenbuch go Please Credit question

maybe following used as little you thanks. Great, up, both And and new start up care of talk see on a the could maybe bit dynamic and that, you competitive the car about dealers to the market? open

in with whole this place what imagine, that would seen put Chrysler, I lot thing you've of for was stuff given hit. a

your And so market capabilities will and better think there to non-prime? then the opportunities going you share how funding and fare there given your are be

for question. thanks Yes, Moshe the

I the we year January, saw probably February, into competition, especially the intense non-prime say actually pretty rational would was heightened year. competition, into coming the So, segment. but coming on

some seen You've of in that our results.

right, competition between think we it non-prime. going us have forward, to separate you're I and for prime

putting exclusive is FCA exclusive Capital. all of and side are On incentives mentioned, Chrysler that as the the we market in that the to us to prime because

the for We If look rate we're to we new just expect FCA that far, continue ended our plus. closer increase. XX%. at April quarter to to We XX% penetration so vehicle

we drive us of really continue for going expect vehicle our volume to that we And see new So segments, the would captives across forward. the of all kind to there.

going years the our and scale this good our a at our to approach, our I shape. approach mentioned, to liquidity standpoint. we're term think of near in in side, pretty non-prime be funding lot with least come out worked to we've liquidity cautious in platform We ourselves from and diversify the position of thing to position, On a do

given advantage to segment the non-prime our other compared our a some feel have competitive competitors. non-bank we like in do of we scale, And do

ourselves So, in it. we're market for of going our of kind out select position to as come we being opportunistic of segments

space. to And see consider near opportunity that, of cars. in of a now our we Yes, the as cities aggressive the a sort car existing we being we huge We right That's dealers very to us. strength. the used looking of out just it's way prime two inventories for it, tale add new clear to here their see subprime see captains and

advanced are we - models. have we scoring So

response uses in we role in We that approach all earlier like proof and into we're income plays credit that what to increased data putting big how a sources. checks question alternative of And Fahmi employment. And of place of in of said have of the confidently some to market. the all the around verification

that in of sure goes All making that we through to book high crisis. we're not, continue that quality the going

could particularly either capital repurchase repurchase or a the you the a begin in need see about a implications again, the markets capital, And appreciate I about that dividend. bit to for with the financing little just discussion capital has Could some as parent. point environment given what to and potentially to testing stress economic respect the talk you the share share would Thanks. have positive Great. to follow the up

So, just discuss that. could you Thanks.

Sure.

first say through plan we distribution and to cycle. designed So, our be policy, supported capital let our all, me dividend the of our policy

we withstand that of first dividend mentioned the And so sustainable the is we all, of as kind I as think very crisis.

something a for Capital been a sheets. capital still There efforts balance to our hard we're for lot we on. excess really distribute for worked focused in of Since excess us us we've position. And efficient to has been XXXX, us that more has luckily an capital. have

and pricing taken disciplined very our We going very price determination. We've approach, a to very especially good we've same approach. feel standpoint capital. a make the of in thoughtful like going we're stewards disciplined And forward, been from

submissions. previously about submitted we there. the submission have the [indiscernible] for the execution And feel early from still announced good billion off $XXX we CCAR million $X.X just through left tender plan. in April the Coming February, We the in

the about feel months the we decisions forward We'll on results get going our we general, the in position. talk able more liquidity really capital good how forward. make in to We try about be back. really good position. deploy We'll our as those to capital financial our best feel coming go But about to we continue

talked whether feel is it's we us the of to time if opportunities, inorganic organic past, for whether the I repurchases think like through opportunities, dividends all or in that about news now the we've good options preserve right share The is it's capital. right shareholder or through distributions

go considered thinking. of those are our being and through All still options

thank Great, you.

is ahead. Mark go DeVries question next from Please Barclays. Our with

falling where kind Thanks. hoping I GDP the assumptions was thank so, assumptions we you get And a XQ? behind those to little a bit about build consensus? you. see peaking. if reserve the in of expect kind kind economic are today's material more of Yes, then, of And reserve levels detail should consistent with

question. Thanks the for

an CECL of view step just back Let and overall our maybe me process. take

very history, a historical of with the whether model, characteristics and loan starts payment or granular the which looks TDRs at well as process level whether the delinquencies, detailed prepayments, So data the it's some of loan underlying themselves they're non-TDRs. as loans

macroeconomic drivers And forecast, throughout key then remarks. that uses mentioned which I've prepared a the which model the has

So up with economic third forecast estimates. use we a - we with We a come of a up baseline party. that's made consensus come up

We results. the then model forecast other varying of of have some is kind a of addition positive, to one degrees also and and three in economic economic negative some has the forecasts outputs, moderate scenario, use kind which slow to growth

the see based in enhance are model mentioned, - of we as not picked we is we or reserves to qualitative risks other want seeing. up that overlays I the put either what further by also appropriate on kind model use to management that

scenario, of downturn just So with to our the reserve what some COVID. it did experienced day have in. to followed one of This weighting process. negative level a and one not did we’ve blended But a day have scenario that CECL some level obviously reserves through going a downturn

end For then XX% about about with year the that we that contracting to approach GDP pretty economy recovery steep as drop used, We came of similar the started day and beginning exact a very in off the assumed half reopen. a up the to QX, in we that and two scenario quarter used. the second baseline approach X%; unemployment XX%

we of So then scenario at top end the we some on did risk protect that And baked we economic in. on also to qualitative specific that just of reserves the saw had have quarter. that downside

to key we’re going mentioned. all QX, into variables of economic Going that monitor I those

better going programs update of and of all impact having including We’re of the forecast, some stimulus a understanding the hopefully consumer. the to on the

early few signs of by of encouraged and accounts the days, the very just been over payments the last things so the impacts some on that. like have on some applications, week last We or on

into lot it's now So of we I give all and things, We're to to sense between assess of a very QX. early those going any have the kind to think end June. learn

term If you complete would to market? your drive assets? And helpful. the That's able in non-prime ability about not, finance of expect be Okay. thoughts that a what kind securitization to are then, this the do you

to we think securitization or Yeah. execute be able have I just your answer drive results had with we The yes, to just do we'll is on that short a SDART. based that the question confidence

in record think itself. market I our speaks track for ABS the

at The ability for us very to right beginning positive is for hit market April the of the us.

able of we there, it So to we go that of we'll SDART ago is just but a execution couple benchmark had we'll confidence successful weeks builds be platform, The our and have that. from execute off yes, drive. a

great. Okay, Thank you.

Securities. Scharf JMP is ahead. with next Our from go Please question David

thinking I But in underlying the on if and point and the regarding on inputs follow-up of reserving my wondering rates such the just more just it important drives could questions. the provide unknowns assumptions. obviously for, expectations it's at was what pricing a taking on certainly trajectory since morning not the question I previous little term, recovery car are but good input ultimate this Hi, into you near about used reserving. thanks ultimately can the for you're an color maybe particular, how all as

Sure.

the on of two and it's prices not being the are cars. three months, last able auction to buy used between months, auction to take to open next or month mentioned, very all dealers going the where car I disruption based activity. hard view With a book to of being as also houses, over month, repossession not the go So

hard So it's prices to very extrapolate forward. going used car

influence we're are at looking of factors kind that help going. several there to where it's However,

pressure And - positive car will are some downward some on are and used put prices.

volume as the On with not be closures be there the demand plant there. new more positive vehicle side, new vehicles for could recently, may used

the There incentives OEMs affordability of that the been car be outside used drove used Affordability into car there demand, put an drives demand. the could something that has always market.

the for incentive packages. what do, OEMs biggest to used be OEMs with generally the their impact think is I what do car pricing, going

to offers that that's range. put kind very very vehicles typically If out majority two attractive customers and year they're continue of I’d to vehicles the to be to take that's auction. vehicles of specifically in five used And aggressive, we that impacts

OEMs ultimately I those think, watched over couple from couple you've incentive to used if of next going that's do what market. data and standpoint drive an watched points months car So the price of the

fewer type supply dynamic is used the forecast in I of point point, their that mean too of of you're a new months depressed the of at of there there translates how built recoveries of that vehicles time dramatically Is which after inflection at number financial into curious, in sort or was of any and viewing the impact was sales, which values. increased assumption? aggressive into a on But vehicle some was obviously crisis trade-ins. in sustained point some I last sort shortage

demand. things if are think to people normalization the public wanting using going of how that transportation I it. many of will. all behavior about And versus press recently No, something like, increases to kind forward have of vehicle. own be consumer there their post may plays going That little you a into that lot There's be

replenish. the Mahesh to dealer being back to have auctions right dealers to the inventory vehicles. go actually not not going replenish They're levels. they to to auctions, mentioned, And inventory, able now the selling their

lot So factors going and and What I or drive adjusting There's play. a monitoring think that it it are. the we're other. all it be that is those we whatever results do comes know tracking way to into can of to one

pretty the through sales percentage sale isn't virtual open houses negative. all houses been auction of but open pretty the mean out the are to we been the Manheim high. operate auctions. Most also of these are coming news the which of And I And report the And rate virtually. has market is Yes. auction high.

as one OEMs gets area So a a that the what by of while on lot how sort used decline, a vehicle a up supported have and depends now decline do bent because are of kind of in inventory that's the of particular think right system. vehicles we manufacturing, far we expected kind And we as lot category. seeing, released of into it's seen vehicle the new we

are eventually do in used up the up So expect the and back that there, we will pick sharply. spectrum broad demand out vehicles pretty of back pick

QX sort rule think just on thumb, in late what any prime. And extensions, and we certainly maybe for is be it. But yield just be of days? I we Got a could XX why yields about for should of realize yield. suspended obviously given depression impacted going terms quick be guidance there points bigger given and of next maybe - up appreciate late basis follow of of a mix on I what may the fees temporary and be the mean by waiver is waiver to the of might just

the thumb standpoint. necessarily, of a the rule of I have QX what growing of towards lease continuation prime what There lot our some XXXX a whether is think balances, the of yield - bigger I the pace a of it more being whether a than portfolio the and is a end of volume you loan faster saw you a you've mentioned, is from it in but things mix. No, seen at

But us. if as going that's to outside I and think NIM, these that as just a low stabilize. continue with the standpoint, forward spreads driving rates yield, from going credit market especially well, NIM to maybe to the normalize expect [indiscernible] we're incentives in the mention I consumers of

that a our in You benefit seeing overtime. P&L of will start

benefit improved going for year. the interest through the start in to expense P&L of April, that the rest of you're month as things item, our throughout So the hopefully come seeing line

you. Great. Thank

Our Please go Graseck next with ahead. question is Morgan from Betsy Stanley.

there declines I wondering are there's know going us if on. a prices on sharp Hi addition give size on been How your Jeff portfolio. market Betsy. jobs significant in actually to was on guys. an Adelson that's of for the Obviously, could It's update some you? in else and there I that's Texas. an oil actually pretty been impact guys you everything

from us help both portfolio understand factors? of that maybe the Just of impacts those

we those to in things are at like our The do an different that sectors. States assets at, factor good we So, try We origination look from Once onto question. standpoint. look use do balance state, to by and have by sector, to code. so by to have and to go we zip it state sheet, it's by try reconcile it tough booked we back

combined, those kind XX% if patch Louisiana, the you states we our all it's states, portfolio. about Oklahoma, of So, Mississippi, Texas, whether at look of will, it's, old if of

have with the hotel the sector sector distressed. been energy travel, equally along I So, all, think, entertainment,

any necessarily help the And are are the I I we recovery. you're to few I don't here across see, next we Texas to in in will signs that different. know reopen planning mentioned think But we Dallas, is over board. starting think that of and and weeks Texas,

But new question affecting that's the as going in and impact to have the the as because in the neighboring as slump Houston of in is very how is patch valid that effect car dental area. stimulus the repayments context what term we take buy of sales the on package far a and and that I project [ph] long what's well oil of as his

and the just so forth. so - And overlay all were relative the to way following terms appreciate of talking on was really thanks. qualitative other how up of your of then the commentary and assumptions about a end the Okay, in the think the on But X% additional you on an your of is about that quarter, macro to unemployment at at there quarter? end the much

mean, I get to don't No, into think go I I this.

the the just, this, go impact. the was I of qualitative going into size to I overall think we're don't Sorry, versus

take all to have together, it right. We

to our we balance. that and reserve have reserve. the at And the are of to We look ultimately approaching compared results XX.X% XX% then quarter at look at end now the felt reasonableness

severe other feel standpoint. for few a very being. reserved there We a percentages time mentioned stress well I from And the

part time into the our the forecasts. Yes, quarter. that large is the the on of component view of is was going first Xst in add January, a macroeconomic says, in additional he of already quarter we the there had the then quantitative build And what first and an CECL CECL a And this in number.

it. you. Thank Got Okay.

questions now today. the I concludes over will Aditya remarks. Mahesh time allocated for call This turn to for the closing

interest So thank Consumer. you and everyone your today Santander in for joining the for call

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

This concludes today's call. conference

you pleasant You may disconnect have for your day. lines. participating Thank a and