Santander Consumer USA Holdings (NYSE:SC) stock was on Friday up more than 9% after that company indicated that the Federal Reserve Board of Governors had given an okay to the board’s authorization of a $400 million buyback program of the company’s common shares.
Santander Consumer beats Wall Street expectations
The subprime automotive lender plans to repurchase its common stock under the program through to the end of the Q2 2109. The move comes after the company had announced a similar repurchase program of $200 million that ended in January this year.
Santander Consumer has been performing well since the beginning of the year and up to date, they are 25% up. The company benefitted from exceptional earnings that beat Wall Street expectations. The company earned about $242 million in revenue translating to $067 EPS which was a result of falling expenses, higher loan originations and decrease in provisions for loan losses in Q1.
More potential lies ahead for Santander
The company has attracted the attention of a number of analysts since it announced its earnings results who indicate that capital returns might have exceeded expectations. The Friday announcement shows that there is some runway for the company to buy back stock which offers the stock the necessary momentum that will see it replicate the mid-April highs.
Although the buyback program is a great thing there are concerns regarding the Santander Consumer share on whether its parent company Banco Santander (NYSE: SAN) will ultimately buyback stock that they already do not own. Currently, Banco Santander holds close to 69.81% of the Santander Consumer’s outstanding stock.
After years of scrutinizing Santander’s operations in the US, the Federal Reserve seems to loosen the reins on the company which shows that there is a possibility of a bigger move in the future. The announced buyback might be a short-term boost as well as an indication of what is expected from Santander in the near future.
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