A former Sovereign Bank branch is rebranded as Santander's first retail bank branch in the United States in New York, U.S., on Thursday, Oct. 17, 2013. Photographer: Ron Antonelli/Bloomberg *** Local Caption ***
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Santander Consumer USA, the Dallas-based car loans arm of Spain’s biggest lender, has admitted to errors in more than three years of its accounts in the latest setback for a unit already under fire from regulators.

In a statement on Friday, the subprime lender said its financial statements for 2013, 2014 and 2015 could no longer be relied upon. It explained that it had changed its method of accounting for loans bought at a discount from dealers, and for allowances for credit losses. Figures for the first quarter of 2016 were also wrong for the same reasons, the company said. 

Scusa, as the business is known, added that the disclosure — delayed twice — was not expected to have any material impact on its net cash position, and shareholder equity was now about 1 per cent higher than it was at the end of March.

But the unit said it was taking new steps to improve its governance — including the appointment of Scott Powell, chairman of Santander’s US holding company, to the Scusa board — and would update investors soon on “previously unreported material weaknesses” in its internal controls. 

Once that process is completed, Scusa said, it will report its financial performance for the second quarter. These figures had been scheduled for release on July 27, when the company first shocked investors by saying it needed more time to sit down with current and former auditors. 

“We are entirely committed to achieving the highest standards of integrity within our financial reporting and control environment and believe that the actions we are announcing today are a further important step toward achieving that goal,” said Jason Kulas, president and chief executive. 

Failures of governance at Scusa have long been a headache for Ana Botín, executive chairman of Santander, who vowed to get a better grip on the entire US business after taking over the top job at Spain’s biggest bank from her late father in 2014. 

Earlier this year, Scusa’s parent, Santander Holdings USA, set an unenviable record by becoming the first bank to fail the annual stress test carried out by the Federal Reserve for a third year in a row. 

Although the bank cleared quantitative hurdles, the Fed censured it — along with a US unit of Deutsche Bank — for “broad and substantial weaknesses” in its capital-planning processes and “insufficient progress . . . made toward correcting those weaknesses and meeting supervisory expectations”. 

Last summer, Scusa agreed to pay almost $1bn to its former chairman and chief executive, Thomas Dundon, to terminate his employment and buy out his stake in the company, which he founded in 1995. Mr Dundon was replaced as chief executive by Mr Kulas, previously Scusa’s chief financial officer, and Mr Dundon’s former college roommate. 

Shortly afterwards, Blythe Masters stood down as chairwoman of Scusa, saying that she wanted to focus on her blockchain interests. 

Ms Masters, an ex-head of commodities at JPMorgan, had held the position for less than a year. She was replaced by Bill Rainer, a non-executive director who had chaired Scusa’s regulatory and compliance committees. 

News of further turnover in Scusa's executive ranks “is not helping win points with the regulators,” said Kathleen Shanley, an analyst at Gimme Credit in New York, on Friday. 

Shares in Scusa opened strongly on Friday, up about 11 per cent in the first hour of trading, as investors breathed a sigh of relief that the restatement was smaller than they had feared.

John Hecht, an analyst at Jefferies, described the impact of the tweaks in the numbers — and the further delay in confirming second quarter figures — as “not meaningful”.

Still, the shares are down about a quarter this year, much worse than the financials sector as a whole, which is flat.

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