Santander Consumer USA Holdings Inc.

Good morning and welcome to the Santander Consumer USA Holdings Third Quarter 2020 Earnings Conference Call. At this time, all parties have been placed into a listen-only mode. Following today's presentation, the floor will be open for your questions. You may press star 1 to enter the Q&A queue. It is now my pleasure to introduce your host, Evan Black, Head of Investor Relations. Evan, the floor is yours.

Thanks, Kelly. Good morning and thanks, everyone, for joining. On today's call, we have our CEO and President, Mahesh Aditya, and our CFO, Sandy Crum. Certain statements made on today's call may be forward-looking. Please refer to our public SEC filings and the risk factors with respect to these statements. We'll also reference certain non-GAAP financial measures that we believe will be useful to our investors. And the reconciliation of those measures to GAAP is included in the 8K today, October 28, 2020. And with that, I'll turn the call over to our CEO, Nash.

Thank you, Evan, and good morning, everyone. And thanks for joining us to review our results for the quarter. As evidenced by our third quarter results, we continue to operate our business successfully under unique and challenging times. While the pandemic continues to affect our country and our industry, all of our stakeholders remain a top priority, including our shareholders, dealers, customers, and employees. I'd like to take you to slide three to discuss our performance. Our financial results this quarter were strong. Net income totaled $490 million, or $1.58 per degree of the common share, up $258 million versus the same quarter last year. This improvement was driven primarily by three factors. Lower credit losses and provision expenses, better net interest income as we grew the balance sheet, and lower operating expenses. Total auto originations were $8.4 billion during the quarter. Flat versus a strong third quarter last year. Our FCA penetration rate was down versus the third quarter of 2019, but up on a year-to-date basis versus last year. Our collaboration with FCA on incentive programs as well as our originations program that's front on their bank, have continued to support our Chrysler Capital performance. We are cautiously optimistic with credit quality of new bookings in our subprime or core book and our Chrysler Capital loans and leases. Dealer experience and our dealer relationships continue to be a strategic priority for us. We're very pleased with our competitive position with dealers as we continue to grow market shares through the pandemic. Sales experience is likely to become more virtual in the future, increasing the reliance on digital solutions. Leveraging our position in the sector, we are investing in innovative solutions to seamlessly integrate with dealers and enhance the customer experience. We plan to invest significantly in this area to solidify our leadership position for the long term. During the quarter, we also booked $293 million in additional low-cost reserves, primarily as a result of an increase in loan balances. Our reserves now exceed $6 billion, and when combined with common equity capital, we are well-positioned to manage through the pandemic. Early and late-stage Lincoln fee ratios improved significantly year-over-year due to the relief we provided to our customers. Our disciplined approach to new, through-the-door quality of bookings and the effect of government stimulus on payment rates. low delinquency levels combined with record used car prices led to an all-time low net charge-off ratio of less than one percent during the quarter as sammy will discuss later auction performance has recovered to pre-pandemic levels with sales rates in the low to mid 80 range and retention rates in the low 90 range for loans and close to 100 relief while all of our credit metrics have improved we remain cautious on our outlook demonstrated by our level of reserves Regarding customer relief, from March to September, we granted more than 900,000 loan deferrals to approximately 645,000 unique customer accounts. Sammy will give you an update on how these accounts are performing and their latest status. Given our ability to offer this relief coupled with the federal aid at the start of the crisis, the sudden and profound impact of this pandemic has not yet translated to adverse credit performance. In fact, we've seen an increase in payment and payoff rates for both loans and leases up until this point. While we feel good about what we've seen so far from the consumer, we also know that without additional government stimulus being approved, many unemployed consumers will spend through their savings and the tide of this recession could easily turn. So we remain cautious, but we do believe the rapid and extensive actions taken so far have reduced the potential credit impact of this recession rather than just having delayed it. During the quarter, SE demonstrated strong access to liquidity, executing two extremely successful ABS transactions off of our S-bar shelves. Notably, the second transaction of the quarter with $1.9 billion in securities was the largest non-prime auto ABS deal in more than a decade and the largest in our history. The transaction also achieved the lowest cost of funds of all of our previous ABS transactions. In regards to capital, during the quarter, our parent company, Santander Holdings, received an exception to the Federal Reserve Board's interim policy limiting certain capital distributions due to the uncertainty caused by the pandemic. With this exception, we were able to pay our quarterly dividend and continue our previously authorized share repurchase program, leading to a repurchase of more than 10 million shares of our outstanding common stock. Even with these capital distributions, our CET1 ratio increased 30 basis points versus last quarter to 13.7%. We believe the exception from the Federal Reserve also reflects the significant progress made in strengthening our regulatory compliance over the last years. Do not expect to declare or pay a dividend in the fourth quarter of 2020 due to the extension of the Federal Reserve's interim policy regarding dividends and share repurchases. Our ability to pay a dividend is limited by SHUSA's trailing four quarters of net income, and as part of SHUSA, of stress, and we expect to be able to return capital to shareholders once these interim guidelines expire. In summary, we are pleased with the results of the third quarter and are prepared for challenging times ahead. Our originations in credit quality are strong. The pace of customer forbearance requests is down, and consumers who do not need assistance are performing better than expectation. We have the liquidity and capital to absorb elevated credit losses, invest in long-term dealer-focused strategic initiatives, and as a regulatory and current climate permit, continue to return capital to our shareholders. With that, I'll turn the call over to Femi for a more detailed review of our results. Femi?