Everything That Can Go Wrong Is Going Wrong For Santander, According To Barclays

Barclays has downgraded Santander Consumer USA Holdings Inc (NYSE: SC) to Equal Weight from Overweight after the company said it will delay reporting second-quarter earnings and even possibly restate its prior period's financial statements.

The latest development is "just another in a series of missteps" that have weighed on the stock over the past couple years, according to Barclays analyst Mark DeVries.

"We think these continued missteps, combined with a market that has shown ambivalence toward owning auto lenders at this stage in the cycle, will result in SC's multiple being heavily discounted for the foreseeable future, despite the strong returns of the business and a valuation that already appears to be priced for a recession," DeVries said.

Related Link: Barclays: A Slight Earnings Miss Expected For Santander Consumer's Q2 Earnings

DeVries also cut price target to $10 from a previous $15, saying concerns over a potential recession will likely continue weighing on the stock, despite an adequate reserve for higher credit losses. Furthermore, it could remain profitable through such stressed environments.

Additionally, the analyst said the probability of parent company SHUSA buying Santander any time soon appears low "as SHUSA may be precluded from purchasing the public float until it passes CCAR, which it recently failed for the third consecutive year."

At time of writing, shares of Santander were up 1.44 percent on the day to $11.30.

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