Santander Consumer founder departs

Santander Consumer USA Holdings (SCUSA), one of the largest sub-prime auto lenders in the US, has announced that Thomas Dundon, its chief executive and chairman, is to leave and will be replaced by president and chief financial officer Jason Kulas (pictured above).

The move, announced in an official statement to the stock market, was viewed as very sudden, although the company stated publicly that it was “in line with SCUSA’s Board-approved succession plan”. However the decision was described as a mutual one between Dundon and the company. SCUSA said Dundon, who had been CEO for nine years, had plans to ‘pursue new opportunities’.

Dundon set up the company, then known as Drive Financial Services, in Dallas in 1995. It went public in early 2014 and is now approximately 60% owned by Santander Holdings USA, a unit of Spanish banking giant Banco Santander, and the name was changed to reflect this.

Dundon retained about a 10% holding after the company listed, with his stake worth an estimated $928 million. Santander said it would be buying Dundon’s shares back from him.

Despite relinquishing day-today control, Dundon will remain on the board of directors, the company said, and is also going to act as a “senior adviser”. He has been president and chief executive since 2006 and chairman since 2013.

Dundon said: “I am proud to have been part of the company’s success and fortunate to have worked with so many outstanding, driven colleagues over the years.”

Scott Powell, chief executive officer of Santander Holdings USA and head of Santander’s operations in the US, said: “We thank Tom for his vision and leadership as a founder of SCUSA, and a driver of its growth and success.”

Shake-up at Santander parent

There is widespread comment in the US media suggesting that the change of leadership at SCUSA is part of a wider shake-up at the Spanish bank. Executive chairman Ana Botin has been overhauling the organisation’s strategy and senior leadership team as part of reappraisal of its activities following the death of her father who was chairman until last year.

For Q1 2015, SCUSA reported net income of $289 million, a significant increase from the $81.5 million income reported during the same period a year earlier. It had total loan originations of $7.4 billion in the first quarter.

Regulatory scrutiny

The company is one of a number of sub-prime auto lenders to have come under increased regulatory scrutiny in recent months. In February 2015, SCUSA settled allegations from the US Department of Justice (DOJ) that it had improperly repossessed more than 1,100 vehicles from serving military personnel without obtaining the necessary paperwork and court orders required under legislation designed to protect those in military service.

SCUSA agreed to pay $9.4 million without admitting or denying the allegations

The previous year, the company disclosed that it had received subpoenas from the DOJ and the Securities and Exchange Commission (SEC) related to its subprime loan underwriting and securitization processes.

There are also believed to have been issues with Santander Holdings, the consumer finance company’s parent, which was not able to pass the Federal Reserve’s annual stress test.

However, in conference calls with analysts new CEO Kulas said Dundon’s move was “amicably agreed upon and unrelated to the company’s performance and regulatory standing.”

Management reshuffle

Following Kulas’s move to lead the company, Jason Grubb, chief operating officer, originations, succeeds him as president. Jennifer Popp, deputy chief financial officer, was appointed interim CFO to succeed Kulas in that role, until a permanent CFO is appointed.

The SCUSA board also appointed lead outside director Stephen Ferriss as interim chairman, until SCUSA’s July 15 annual meeting.