We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Sallie Mae (SLM) Q4 Earnings Top Estimates as Expenses Fall
Read MoreHide Full Article
Sallie Mae’s (SLM - Free Report) fourth-quarter 2020 earnings per share of $1.15 (on core basis) handily surpassed the Zacks Consensus Estimate of 33 cents. Also, the bottom line compared favorably with 33 cents reported in the prior-year quarter.
Results benefited from the company’s prudent cost management and improved fee income. Also, benefit from loan losses was a tailwind. However, lower loans and deposits balance posed a major undermining factor.
The company’s GAAP net income attributable to common stock was $431 million or $1.13 compared with $137 million or 32 cents a year ago.
In full-year 2020, Sallie Mae reported GAAP net income attributable to common stock of $871 million or $2.25 per share compared with $561 million or $1.30 in 2019.
Net Interest Income Declines, Expenses Fall
Net interest income in the fourth quarter was $367 million, down 12.4% year over year. The decline is attributable to lower interest income. Net interest margin contracted to 4.82% in the quarter from 5.41% in the year-ago quarter.
The company’s non-interest income was $1 million against non-interest loss of $4 million in the prior-year quarter. The rise mainly stemmed from higher other income and gain on derivatives and hedging activities.
The company’s non-interest expenses fell 12.7% year over year to $124 million. The fall mainly resulted from lower FDIC assessment fees and other operating expenses, partly offset by higher restructuring expenses.
Credit Quality: A Mixed Bag
The company recorded a benefit from loan losses of $316 million against provisions of $98 million witnessed in the prior-year quarter.
Delinquencies as a percentage of private education loans in repayment were 2.8%, stable year over year.
Loans & Deposits Fall
As of Dec 31, 2020, deposits of Sallie Mae were $22.7 billion, down 1.9% from $23.1 billion as of Sep 30, 2020. Lower brokered deposits contributed to the downside.
Loans held for investment were $19.2 billion as of Dec 31, 2020, down 11.3% sequentially. Private education loan portfolio (96% of total loans) was $18.4 billion, down 12% on a sequential basis. During the quarter, the company witnessed private education loan originations of $627 million.
Capital Position Strong
As of Dec 31, 2020, Sallie Mae’s common equity Tier 1 capital was 14%, exceeding the “well-capitalized” industry benchmark in regulatory requirements. Also, it compared favorably with year-ago quarter figure of 12.2%.
Capital Deployment Activities
Following the approval from Federal Reserve to buy back shares last month, Sallie Mae’s board has approved a repurchase program of up to $1.25 billion in 2021.
Outlook 2021
The company expects earnings per share (on GAAP basis) to be between $2.20 and $2.40. Total portfolio net charge-offs of $260-$280 million are anticipated for full-year 2021.
Private education loan originations are projected to grow 6-7% year over year. The company’s non-interest expenses are expected to fall in the $525-$535 million band.
Our Viewpoint
Sallie Mae remains focused on maintaining a solid capital position by introducing multiple complementary products and improving efficiency. Additionally, its aim to solidify presence in the consumer banking business space bodes well. However, the contraction of margin due to lower rates is a concern. Nevertheless, we believe improving economic conditions will further assist Sallie Mae in maintaining its leading position in the student lending market.
Navient Corporation (NAVI - Free Report) reported fourth-quarter 2020 core earnings per share of 88 cents that surpassed the Zacks Consensus Estimate of 81 cents. Also, the bottom line was above the year-ago quarter figure of 69 cents.
UMB Financial (UMBF - Free Report) reported fourth-quarter 2020 net operating income of $3.26 per share, surpassing the Zacks Consensus Estimate of $1.48. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.36. Fourth-quarter results include a pre-tax gain of $108.8 million on the company’s investment in Tattooed Chef, Inc.
Capital One’s (COF - Free Report) shares gained 5.3% in the afterhours trading session in response to better-than-expected fourth-quarter 2020 results. Adjusted earnings of $5.29 per share outpaced the Zacks Consensus Estimate of $2.85. Also, the bottom line was significantly above $2.49 earned in the year-ago quarter.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Sallie Mae (SLM) Q4 Earnings Top Estimates as Expenses Fall
Sallie Mae’s (SLM - Free Report) fourth-quarter 2020 earnings per share of $1.15 (on core basis) handily surpassed the Zacks Consensus Estimate of 33 cents. Also, the bottom line compared favorably with 33 cents reported in the prior-year quarter.
Results benefited from the company’s prudent cost management and improved fee income. Also, benefit from loan losses was a tailwind. However, lower loans and deposits balance posed a major undermining factor.
The company’s GAAP net income attributable to common stock was $431 million or $1.13 compared with $137 million or 32 cents a year ago.
In full-year 2020, Sallie Mae reported GAAP net income attributable to common stock of $871 million or $2.25 per share compared with $561 million or $1.30 in 2019.
Net Interest Income Declines, Expenses Fall
Net interest income in the fourth quarter was $367 million, down 12.4% year over year. The decline is attributable to lower interest income. Net interest margin contracted to 4.82% in the quarter from 5.41% in the year-ago quarter.
The company’s non-interest income was $1 million against non-interest loss of $4 million in the prior-year quarter. The rise mainly stemmed from higher other income and gain on derivatives and hedging activities.
The company’s non-interest expenses fell 12.7% year over year to $124 million. The fall mainly resulted from lower FDIC assessment fees and other operating expenses, partly offset by higher restructuring expenses.
Credit Quality: A Mixed Bag
The company recorded a benefit from loan losses of $316 million against provisions of $98 million witnessed in the prior-year quarter.
Delinquencies as a percentage of private education loans in repayment were 2.8%, stable year over year.
Loans & Deposits Fall
As of Dec 31, 2020, deposits of Sallie Mae were $22.7 billion, down 1.9% from $23.1 billion as of Sep 30, 2020. Lower brokered deposits contributed to the downside.
Loans held for investment were $19.2 billion as of Dec 31, 2020, down 11.3% sequentially. Private education loan portfolio (96% of total loans) was $18.4 billion, down 12% on a sequential basis. During the quarter, the company witnessed private education loan originations of $627 million.
Capital Position Strong
As of Dec 31, 2020, Sallie Mae’s common equity Tier 1 capital was 14%, exceeding the “well-capitalized” industry benchmark in regulatory requirements. Also, it compared favorably with year-ago quarter figure of 12.2%.
Capital Deployment Activities
Following the approval from Federal Reserve to buy back shares last month, Sallie Mae’s board has approved a repurchase program of up to $1.25 billion in 2021.
Outlook 2021
The company expects earnings per share (on GAAP basis) to be between $2.20 and $2.40. Total portfolio net charge-offs of $260-$280 million are anticipated for full-year 2021.
Private education loan originations are projected to grow 6-7% year over year. The company’s non-interest expenses are expected to fall in the $525-$535 million band.
Our Viewpoint
Sallie Mae remains focused on maintaining a solid capital position by introducing multiple complementary products and improving efficiency. Additionally, its aim to solidify presence in the consumer banking business space bodes well. However, the contraction of margin due to lower rates is a concern. Nevertheless, we believe improving economic conditions will further assist Sallie Mae in maintaining its leading position in the student lending market.
SLM Corporation Price, Consensus and EPS Surprise
SLM Corporation price-consensus-eps-surprise-chart | SLM Corporation Quote
Currently, Sallie Mae carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Companies
Navient Corporation (NAVI - Free Report) reported fourth-quarter 2020 core earnings per share of 88 cents that surpassed the Zacks Consensus Estimate of 81 cents. Also, the bottom line was above the year-ago quarter figure of 69 cents.
UMB Financial (UMBF - Free Report) reported fourth-quarter 2020 net operating income of $3.26 per share, surpassing the Zacks Consensus Estimate of $1.48. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.36. Fourth-quarter results include a pre-tax gain of $108.8 million on the company’s investment in Tattooed Chef, Inc.
Capital One’s (COF - Free Report) shares gained 5.3% in the afterhours trading session in response to better-than-expected fourth-quarter 2020 results. Adjusted earnings of $5.29 per share outpaced the Zacks Consensus Estimate of $2.85. Also, the bottom line was significantly above $2.49 earned in the year-ago quarter.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>