LATE: People walk past a Rio de Janeiro branch of Banco Santander, the US car-financing company that has missed a deadline. Picture: REUTERS/PILAR OLIVARES
LATE: People walk past a Rio de Janeiro branch of Banco Santander, the US car-financing company that has missed a deadline. Picture: REUTERS/PILAR OLIVARES

MADRID — Banco Santander’s car-financing company in the US missed a second deadline for publishing its annual report as it recalculates provisions for loan losses in response to regulatory concerns.

Santander Consumer USA Holdings has not yet completed the 2015 report and is "working diligently" to turn in the form "as soon as practicable", it said in a regulatory filing on Tuesday.

It does not foresee "any interruption or change to normal business activities".

The US Securities and Exchange Commission’s corporate finance division has requested details of previous disclosures about the credit loss exposure including impairments on troubled debt. The company is changing its method for estimating the provisions on some loans and will correct previous details in its accounts, it said in the filing.

The delay is the latest run-in with US regulators in recent years. Santander’s US retail bank failed the Federal Reserve’s exams for financial resiliency in 2014 and last year because of flaws in risk management and governance. The Fed in July ordered the bank to submit plans describing how it will correct the deficiencies.

"It’s not a good sign," Renta 4 analyst Nuria Alvarez said. "The US consumer unit is a source of problems for the group, and it’s the weakest part within their consumer finance business which, generally, is doing very well and it’s a core business for the bank."

Car sales surged in the US last year, with outstanding loans reaching $1.1-trillion as of December, according to Federal Reserve Bank of New York data.

That is up more than 30% from its pre-crisis peak. Car loans to borrowers with the poorest credit have increased more than 150% from the market bottom six years ago, compared with a 98% rise in overall car lending in that period.

Bank of America analyst Kenneth Bruce cut Santander Consumer last month, saying an erosion in subprime car credit may weigh on earnings. Higher losses should be expected if used-car prices come under pressure, given the unit’s subprime concentration, he said. Most subprime borrowers purchase used cars.

Santander Consumer shares tumbled 8.9% to $9.75 on Tuesday, the most since January. The stock has dropped 38% this year, the third-worst performance among 235 companies in the Russell 1000 Financial Services index.

JMP Securities cut Santander Consumer to market perform from market outperform.

Since its initial public offering in January 2014, Santander Consumer shares have dropped 60%. The Spanish bank holds about 59% of the shares and aims to increase its stake to 69% as it has plans to buy out another large holder.

Chairman Ana Botin has said she remains committed to doing business in the US, where the Spanish bank has created an umbrella company under the direction of new CE Scott Powell, formerly the head of consumer banking at JPMorgan Chase.

In addition to its Dallas-based car lender and retail bank, Santander runs a private bank out of Miami and has a unit in Puerto Rico.

Bloomberg