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Navient (NAVI) Q1 Earnings Surpass Estimates, NII Falls Y/Y
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Navient Corporation (NAVI - Free Report) reported first-quarter 2022 adjusted core earnings per share of 90 cents, surpassing the Zacks Consensus Estimate of earnings per share of 76 cents. The reported figure was lower than the prior-year quarter’s $1.71.
A fall in net interest income (NII) and non-interest income hindered the results. Also, a rise in provisions was a headwind. Nonetheless, lower expenses alleviated the bottom-line pressure.
Navient’s GAAP net income was $255 million compared with $370 million in the prior year.
NII & Expenses Decrease, Provisions Rise
NII declined 7% year over year to $337 million in first-quarter 2022.
Interest income from private education loans declined 13% to $276 million. Also, the reported figure lagged the Zacks Consensus Estimate of $329.5 million.
Non-interest income fell 27% to $223 million. The downside stemmed from a decline in all components.
Provision for loan losses was expenses of $16 million against a benefit of $87 million witnessed in the prior-year quarter.
Total expenses declined 21% to $212 million. Lower operating expenses, and a rise in goodwill and acquired intangible asset impairment and amortization expenses primarily resulted in the fall.
Segmental Performance
Federal Education Loans: The segment generated a net income of $107 million, down 4.5% year over year.
As of Mar 31, 2022, the company’s net Federal Family Education Loan Program (FFELP) loans were $51 billion, down 3.1% sequentially.
Consumer Lending: The segment reported a net income of $79 million, which decreased 66.2 % from the year-ago quarter. Higher provision for loan losses affected the segment’s performance.
Private education loan delinquencies of 30 days of $810 million were up from the prior-year quarter’s $460 million.
As of Mar 31, 2022, the company’s net private education loans totaled $20 billion, down marginally from the prior quarter. In addition, Navient originated $941 million of private education refinance loans in the reported quarter.
Business Processing: The segment reported a net income of $14 million, down 46.2% from $26 million recorded in the year-ago quarter.
Liquidity
In order to meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered student-loan assets, and distributions from securitization trusts.
It might also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term asset-backed securities (ABS), enter additional Private Education Loan ABS repurchase facilities, or issue additional unsecured debt.
Notably, the company had $708 million of cash and cash equivalents as of Mar 31, 2022.
Capital Deployment Activities
In the first quarter, the company paid out $25 million in common stock dividends.
In the reported quarter, Navient repurchased 6.2 million shares of common stock for $115 million. As of Mar 31, 2022, there was $885 million of the remaining share-repurchase authority.
Our Take
Navient’s recurring business model aids top-line growth. The company’s education loan portfolio generates significant cash flows.
However, Navient’s performance in the first quarter was affected by the non-interest income and NII.Relatively higher interest rates will also lower Navient’s floor income, affecting margins.
Navient Corporation Price, Consensus and EPS Surprise
Truist Financial’s (TFC - Free Report) first-quarter 2022 adjusted earnings of $1.23 per share handily surpassed the Zacks Consensus Estimate of $1.12. The bottom line grew 4.2% from the prior-year quarter.
Truist Financial’s results were aided by modest average loan growth and provision benefits. However, lower revenues, a rise in expenses and relatively lower rates were the major headwinds.
U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, the bottom line compares unfavorably with the prior-year quarter’s figure of $1.45.
U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
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Navient (NAVI) Q1 Earnings Surpass Estimates, NII Falls Y/Y
Navient Corporation (NAVI - Free Report) reported first-quarter 2022 adjusted core earnings per share of 90 cents, surpassing the Zacks Consensus Estimate of earnings per share of 76 cents. The reported figure was lower than the prior-year quarter’s $1.71.
A fall in net interest income (NII) and non-interest income hindered the results. Also, a rise in provisions was a headwind. Nonetheless, lower expenses alleviated the bottom-line pressure.
Navient’s GAAP net income was $255 million compared with $370 million in the prior year.
NII & Expenses Decrease, Provisions Rise
NII declined 7% year over year to $337 million in first-quarter 2022.
Interest income from private education loans declined 13% to $276 million. Also, the reported figure lagged the Zacks Consensus Estimate of $329.5 million.
Non-interest income fell 27% to $223 million. The downside stemmed from a decline in all components.
Provision for loan losses was expenses of $16 million against a benefit of $87 million witnessed in the prior-year quarter.
Total expenses declined 21% to $212 million. Lower operating expenses, and a rise in goodwill and acquired intangible asset impairment and amortization expenses primarily resulted in the fall.
Segmental Performance
Federal Education Loans: The segment generated a net income of $107 million, down 4.5% year over year.
As of Mar 31, 2022, the company’s net Federal Family Education Loan Program (FFELP) loans were $51 billion, down 3.1% sequentially.
Consumer Lending: The segment reported a net income of $79 million, which decreased 66.2 % from the year-ago quarter. Higher provision for loan losses affected the segment’s performance.
Private education loan delinquencies of 30 days of $810 million were up from the prior-year quarter’s $460 million.
As of Mar 31, 2022, the company’s net private education loans totaled $20 billion, down marginally from the prior quarter. In addition, Navient originated $941 million of private education refinance loans in the reported quarter.
Business Processing: The segment reported a net income of $14 million, down 46.2% from $26 million recorded in the year-ago quarter.
Liquidity
In order to meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered student-loan assets, and distributions from securitization trusts.
It might also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term asset-backed securities (ABS), enter additional Private Education Loan ABS repurchase facilities, or issue additional unsecured debt.
Notably, the company had $708 million of cash and cash equivalents as of Mar 31, 2022.
Capital Deployment Activities
In the first quarter, the company paid out $25 million in common stock dividends.
In the reported quarter, Navient repurchased 6.2 million shares of common stock for $115 million. As of Mar 31, 2022, there was $885 million of the remaining share-repurchase authority.
Our Take
Navient’s recurring business model aids top-line growth. The company’s education loan portfolio generates significant cash flows.
However, Navient’s performance in the first quarter was affected by the non-interest income and NII.Relatively higher interest rates will also lower Navient’s floor income, affecting margins.
Navient Corporation Price, Consensus and EPS Surprise
Navient Corporation price-consensus-eps-surprise-chart | Navient Corporation Quote
Currently, Navient carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
Truist Financial’s (TFC - Free Report) first-quarter 2022 adjusted earnings of $1.23 per share handily surpassed the Zacks Consensus Estimate of $1.12. The bottom line grew 4.2% from the prior-year quarter.
Truist Financial’s results were aided by modest average loan growth and provision benefits. However, lower revenues, a rise in expenses and relatively lower rates were the major headwinds.
U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, the bottom line compares unfavorably with the prior-year quarter’s figure of $1.45.
U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.