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Sallie Mae (SLM) Q1 Earnings Lag Estimates, NII and Loans Rise

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Sallie Mae (SLM - Free Report) , formally known as SLM Corporation, reported first-quarter 2022 core earnings per share of 46 cents, which missed the Zacks Consensus Estimate of 77 cents. The bottom line compared unfavorably with $1.77 reported in the prior-year quarter.

SLM’s results benefited from improved net interest margin (NIM) expansion. Private education loan originations were also decent in the quarter. However, less private education loan sales, increased expenses, and a fall in fee income posed major undermining factors.

The company’s GAAP net income attributable to common stock was $127.5 million, down 80% from the prior-year quarter.

Net Interest Income (NII) Improves, Expenses Climb

NII in the first quarter was $375.03 million, up 13% year over year. Also, the reported figure surpassed the Zacks Consensus estimate of $369.2 million. The NIM expanded to 5.29% from 4.40% in the year-ago quarter.

The company’s non-interest income was $22 million, down significantly from the prior-year quarter’s $413 million. The fall mainly stemmed from lower gains on sales of loans.

Sallie Mae's non-interest expenses increased 5.6% year over year to $133 million. The increase mainly resulted from higher FDIC assessment fees, other operating expenses, and compensation and benefits.

Credit Quality Deteriorates

The company recorded a provision for credit losses of $98 million against a negative provision of $226 million in the prior-year quarter.

Delinquencies, as a percentage of private education loans in repayment, were 3.5%, up from 2.1% in the prior-year quarter.

Loans & Deposits Increase

As of Mar 31, 2022, deposits of Sallie Mae were $21.2 billion, up 1.8% sequentially.

Private education loan held for investment was $20.58 billion, up 4.9% on a sequential basis. In the quarter, the company witnessed private education loan originations of $2.2 billion, increasing 6% from the year-ago quarter.

Capital Deployment Activities

In the first quarter, the company repurchased 10 million shares of its common stock for $176 million under its share repurchase programs.

2022 Outlook

The company expects core earnings per share (on a GAAP basis) of $2.80-$3.

It anticipates total loan portfolio net charge-offs of $270-$290 million.

Private education loan originations are projected to grow 8-10% year over year.

The company’s non-interest expenses are expected to be $555-$565 million.

Conclusion

Sallie Mae remains focused on introducing multiple complementary products and improving efficiency. In line with this, SLM completed the buyout of Nitro College, a digital marketing and education solutions company, in first-quarter 2022.

Management noted that it is “readying for what is shaping up to be another busy peak season. While still early, we expect a modest increase in overall college enrollment for Fall 2022, as students navigate a post-pandemic new normal, back on campuses across the country. While market volatility and inflationary trends may continue, we have a resilient business model and strategy. I’m confident our portfolio will continue to perform well, and our loan sale strategy will continue to create shareholder value."

SLM Corporation Price, Consensus and EPS Surprise

 

SLM Corporation Price, Consensus and EPS Surprise

SLM Corporation price-consensus-eps-surprise-chart | SLM Corporation Quote

Currently, the company 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.

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 NII and non-interest income hindered Navient’s results. Also, a rise in provisions was a headwind. Nonetheless, lower expenses alleviated the bottom-line pressure for NAVI.


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