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Navient (NAVI) Q2 Earnings Miss on NII Dip, Expenses Rise
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Navient Corporation (NAVI - Free Report) reported second-quarter 2023 adjusted earnings per share of 70 cents, missing the Zacks Consensus Estimate of 76 cents. The reported figure compares unfavorably with the year-ago quarter’s 92 cents.
A fall in core net interest income (NII) and total other income, and higher expenses affected the results. Nonetheless, a decline in provisions acted as a tailwind.
Navient’s GAAP net income was $66 million, down from $180 million in the prior-year quarter.
NII & Expenses Decrease
Core NII declined 18.5% year over year to $221 million in the second quarter. Further, it missed the Zacks Consensus Estimate of $228.5 million.
Total other income declined 3.7% to $129 million. The downside stemmed from a decrease in all components except net gains on derivative and hedging activities.
Provision for loan losses was $11 million compared with $18 million in the year-earlier quarter.
Total expenses increased 3.6% year over year to $200 million.
Quarterly Performance of Segments
Federal Education Loans: The segment generated a net income of $76 million, down year over year from $110 million.
As of Jun 30, 2023, the company’s net Federal Family Education Loan Program (FFELP) loans were $40.85 billion, down 3.1% sequentially.
Consumer Lending: This segment reported a net income of $75 million, which increased from $71 million in the year-ago quarter.
The private education loan delinquency rate greater than 30 days was 4.4% compared with 4.1% in the prior-year quarter.
As of Jun 30, 2023, the company’s private education loans were $17.73 billion, down 3% from the prior quarter. Navient originated $142 million of private education refinance loans in the reported quarter.
Business Processing: Segmental net income of $6 million plunged from $10 million in the year-ago quarter.
Liquidity
In order to meet liquidity needs, Navient expects to utilize various sources including cash and investment portfolio, predictable operating cash flows provided by operating activities, repayment of principal on unencumbered education loan assets and distributions from securitization trusts. It may also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term asset-backed securities (ABS), enter additional Private Education Loan and ABS repurchase facilities or issue additional unsecured debt.
Notably, it had $1317 million of total unrestricted cash and liquid investments as of Jun 30, 2023.
Capital Deployment Activities
In the second quarter, the company paid out $20 million in common stock dividends. In the reported quarter, Navient repurchased shares of common stock for $80 million. As of Jun 30, 2023, there was $435 million of the remaining share-repurchase authority.
Our Take
Navient’s diversified business segments will support revenue growth. It has been an eminent portfolio holder of private education loans. However, in the second quarter, the company recorded a decline NII and fee income. Also, a rise in expenses increased the bottom-line pressure. Nonetheless, a decline in provisions was a positive.
Navient Corporation Price, Consensus and EPS Surprise
Capital One’s (COF - Free Report) second-quarter 2023 earnings of $3.52 per share surpassed the Zacks Consensus Estimate of $3.31. The bottom line tanked 29% from the year-ago quarter.
Results of COF were aided by an increase in NII and fee income. However, despite higher rates, the net interest margin declined year over year. Also, higher expenses, along with a significant rise in provisions, were the undermining factors.
PROG Holdings, Inc. (PRG - Free Report) second-quarter 2023 earnings of $0.92 per share surpassed the Zacks Consensus Estimate of $0.66. Further, the bottom line jumped 76.9% from the year-ago quarter.
Results of PRG were aided by a decline in expenses. However, a slip in revenues was worrisome.
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Navient (NAVI) Q2 Earnings Miss on NII Dip, Expenses Rise
Navient Corporation (NAVI - Free Report) reported second-quarter 2023 adjusted earnings per share of 70 cents, missing the Zacks Consensus Estimate of 76 cents. The reported figure compares unfavorably with the year-ago quarter’s 92 cents.
A fall in core net interest income (NII) and total other income, and higher expenses affected the results. Nonetheless, a decline in provisions acted as a tailwind.
Navient’s GAAP net income was $66 million, down from $180 million in the prior-year quarter.
NII & Expenses Decrease
Core NII declined 18.5% year over year to $221 million in the second quarter. Further, it missed the Zacks Consensus Estimate of $228.5 million.
Total other income declined 3.7% to $129 million. The downside stemmed from a decrease in all components except net gains on derivative and hedging activities.
Provision for loan losses was $11 million compared with $18 million in the year-earlier quarter.
Total expenses increased 3.6% year over year to $200 million.
Quarterly Performance of Segments
Federal Education Loans: The segment generated a net income of $76 million, down year over year from $110 million.
As of Jun 30, 2023, the company’s net Federal Family Education Loan Program (FFELP) loans were $40.85 billion, down 3.1% sequentially.
Consumer Lending: This segment reported a net income of $75 million, which increased from $71 million in the year-ago quarter.
The private education loan delinquency rate greater than 30 days was 4.4% compared with 4.1% in the prior-year quarter.
As of Jun 30, 2023, the company’s private education loans were $17.73 billion, down 3% from the prior quarter. Navient originated $142 million of private education refinance loans in the reported quarter.
Business Processing: Segmental net income of $6 million plunged from $10 million in the year-ago quarter.
Liquidity
In order to meet liquidity needs, Navient expects to utilize various sources including cash and investment portfolio, predictable operating cash flows provided by operating activities, repayment of principal on unencumbered education loan assets and distributions from securitization trusts. It may also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term asset-backed securities (ABS), enter additional Private Education Loan and ABS repurchase facilities or issue additional unsecured debt.
Notably, it had $1317 million of total unrestricted cash and liquid investments as of Jun 30, 2023.
Capital Deployment Activities
In the second quarter, the company paid out $20 million in common stock dividends. In the reported quarter, Navient repurchased shares of common stock for $80 million. As of Jun 30, 2023, there was $435 million of the remaining share-repurchase authority.
Our Take
Navient’s diversified business segments will support revenue growth. It has been an eminent portfolio holder of private education loans. However, in the second quarter, the company recorded a decline NII and fee income. Also, a rise in expenses increased the bottom-line pressure. Nonetheless, a decline in provisions was a positive.
Navient Corporation Price, Consensus and EPS Surprise
Navient Corporation price-consensus-eps-surprise-chart | Navient Corporation Quote
Performances of Other Finance Stocks
Capital One’s (COF - Free Report) second-quarter 2023 earnings of $3.52 per share surpassed the Zacks Consensus Estimate of $3.31. The bottom line tanked 29% from the year-ago quarter.
Results of COF were aided by an increase in NII and fee income. However, despite higher rates, the net interest margin declined year over year. Also, higher expenses, along with a significant rise in provisions, were the undermining factors.
PROG Holdings, Inc. (PRG - Free Report) second-quarter 2023 earnings of $0.92 per share surpassed the Zacks Consensus Estimate of $0.66. Further, the bottom line jumped 76.9% from the year-ago quarter.
Results of PRG were aided by a decline in expenses. However, a slip in revenues was worrisome.