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Santander's US auto lender plunges on earnings delay

Jonathan Nicholson | NurPhoto | Getty Images

The auto-lending U.S. arm of Banco Santander, Santander Consumer USA, saw its shares plunge in early Monday trading after the company announced it would delay its second-quarter earnings report, previously expected for Wednesday, as it looks to resolve issues surrounding "discount accretion and credit loss allowance methodologies."

Santander Consumer USA stock cratered more than 10 percent in morning trading in New York, and shares are down more than 32 percent this year. The stock is changing hands at more than a 50 percent discount to its 2014 IPO price.

The bank and its auditors are evaluating "the manner which SC accretes loan discounts over the life of a loan," analysts at Jefferies wrote Monday. The analysts said they think the "slope" of the curve applied to loans, which factors in potential losses, "is what auditors are evaluating." They added that they don't "anticipate the earnings impact of any potential change will be material."

Loan discounts have ranged from 1 percent to 5 percent, with recent reports of 1.5 percent, Jefferies analysts said — which means that Santander Consumer USA loans have retained the overwhelming majority of their value.

Jefferies is maintaining a buy rating on Santander Consumer USA, with a target of $15.

A representative for Santander Consumer USA was not immediately available to comment. In a statement Monday morning, the bank said it is in discussions with current and previous accountants on its "discount accretion and credit loss allowance methodologies. The resolution of these matters may impact prior period financial statements" in addition to the timing of its second-quarter results.

Banks have revved up auto lending in recent quarters, as cheap money has facilitated the increase in the size and duration of U.S. auto loans. But some are ringing the alarm, saying the sector has grown overheated. Earlier this year, the total value of auto loans shot past the $1 trillion mark.

In June, JPMorgan Chase CEO Jamie Dimon sounded the alarm on auto loans, saying "Someone is going to get hurt."

Santander Consumer USA has had other surprises this year. Earlier this month, Blythe Masters, who joined the bank less than a year ago as nonexecutive chairwoman, announced she would resign from her role and become the Santander Consumer USA's group senior advisor on blockchain, the technology that underlies bitcoin.

Dallas-based Santander Consumer USA manages assets of more than $53 billion and services more than 2.7 million customers, the bank says.