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Sallie Mae (SLM) Q1 Earnings Lag Estimates, Expenses Rise
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Sallie Mae (SLM - Free Report) reported first-quarter 2020 core earnings of 79 cents per share, lagging the Zacks Consensus Estimate of 88 cents. However, the figure compared favorably with 34 cents reported in the prior-year quarter.
Results were affected by lower net interest income and elevated expenses. Also, declines in deposits and loan balance were headwinds. However, the negatives were partially offset by higher non-interest income and lower provisions.
The company’s GAAP net income attributable to common stock was $359 million compared with $154 million a year ago.
Net Interest Income Falls, Expenses Rise
Net interest income for the first quarter was $400 million, down slightly year over year. The decline is attributable to lower interest income. Net interest margin contracted to 5.08% in the quarter from 6.28% reported in the year-ago quarter.
The company incurred non-interest income of $292 million compared with $16 million in the prior-year quarter. The upside mainly stemmed from gains on derivatives and hedging activities, and on sales of loans.
The company’s non-interest expenses climbed 5.1% year over year to $147.3 million. The rise mainly resulted from higher compensation and benefits expenses, and FDIC assessment fees.
Credit Quality: A Mixed Bag
Provision for loan losses was $61 million, down 4.7% from $64 million witnessed in the prior-year quarter.
Delinquencies as a percentage of private education loans in repayment were 3.2%, up 7 bps from year-ago quarter.
Loans Decline, Deposits Improve
As of Mar 31, 2020, deposits of Sallie Mae were $24.4 billion, up from $24.3 billion as of Dec 31, 2019. Increase in retail and other along with brokered deposits contributed to the upside.
Private education loan portfolio was $20.2 billion, down 11.9% on a sequential basis. During the quarter, the company witnessed private education loan originations of $2.3 billion. As of Mar 31, 2020, personal loans stood at $747 million, down 24.1% sequentially.
Capital Position Strong & Capital Deployment Update
As of Mar 31, 2020, Sallie Mae’s common equity Tier 1 capital was 12.4%, exceeding the “well capitalized” industry benchmark in regulatory requirements.
The company repurchased $461 million of common stock under the share repurchase program.
Our Viewpoint
Results of Sallie Mae highlight the continued focus on increasing private education loan assets, maintaining a solid capital position by introducing multiple complementary products and improving efficiency.
We believe that improving economic conditions will further assist Sallie Mae in maintaining its leading position in the student lending market. Additionally, its focus on solidifying presence in the consumer banking business space bodes well. However, the worsening of credit quality keeps us apprehensive.
Navient Corporation (NAVI - Free Report) reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.
Bank of Hawaii Corporation (BOH - Free Report) delivered first-quarter 2020 positive earnings surprise of 35.9%. Earnings per share of 87 cents surpassed the Zacks Consensus Estimate of 64 cents. However, the bottom line compares unfavorably with $1.43 reported in the prior-year quarter.
Ally Financial (ALLY - Free Report) reported first-quarter 2020 adjusted loss of 44 cents per share, lagging the Zacks Consensus Estimate for earnings of 71 cents. The figure also deteriorated from the year-ago quarterly earnings of 80 cents per share.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Sallie Mae (SLM) Q1 Earnings Lag Estimates, Expenses Rise
Sallie Mae (SLM - Free Report) reported first-quarter 2020 core earnings of 79 cents per share, lagging the Zacks Consensus Estimate of 88 cents. However, the figure compared favorably with 34 cents reported in the prior-year quarter.
Results were affected by lower net interest income and elevated expenses. Also, declines in deposits and loan balance were headwinds. However, the negatives were partially offset by higher non-interest income and lower provisions.
The company’s GAAP net income attributable to common stock was $359 million compared with $154 million a year ago.
Net Interest Income Falls, Expenses Rise
Net interest income for the first quarter was $400 million, down slightly year over year. The decline is attributable to lower interest income. Net interest margin contracted to 5.08% in the quarter from 6.28% reported in the year-ago quarter.
The company incurred non-interest income of $292 million compared with $16 million in the prior-year quarter. The upside mainly stemmed from gains on derivatives and hedging activities, and on sales of loans.
The company’s non-interest expenses climbed 5.1% year over year to $147.3 million. The rise mainly resulted from higher compensation and benefits expenses, and FDIC assessment fees.
Credit Quality: A Mixed Bag
Provision for loan losses was $61 million, down 4.7% from $64 million witnessed in the prior-year quarter.
Delinquencies as a percentage of private education loans in repayment were 3.2%, up 7 bps from year-ago quarter.
Loans Decline, Deposits Improve
As of Mar 31, 2020, deposits of Sallie Mae were $24.4 billion, up from $24.3 billion as of Dec 31, 2019. Increase in retail and other along with brokered deposits contributed to the upside.
Private education loan portfolio was $20.2 billion, down 11.9% on a sequential basis. During the quarter, the company witnessed private education loan originations of $2.3 billion. As of Mar 31, 2020, personal loans stood at $747 million, down 24.1% sequentially.
Capital Position Strong & Capital Deployment Update
As of Mar 31, 2020, Sallie Mae’s common equity Tier 1 capital was 12.4%, exceeding the “well capitalized” industry benchmark in regulatory requirements.
The company repurchased $461 million of common stock under the share repurchase program.
Our Viewpoint
Results of Sallie Mae highlight the continued focus on increasing private education loan assets, maintaining a solid capital position by introducing multiple complementary products and improving efficiency.
We believe that improving economic conditions will further assist Sallie Mae in maintaining its leading position in the student lending market. Additionally, its focus on solidifying presence in the consumer banking business space bodes well. However, the worsening of credit quality keeps us apprehensive.
SLM Corporation Price, Consensus and EPS Surprise
SLM Corporation price-consensus-eps-surprise-chart | SLM Corporation Quote
Currently, Sallie Mae carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Companies
Navient Corporation (NAVI - Free Report) reported first-quarter 2020 adjusted core earnings per share of 51 cents that missed the Zacks Consensus Estimate of 72 cents. Also, the bottom line was lower than the year-ago quarter figure of 58 cents.
Bank of Hawaii Corporation (BOH - Free Report) delivered first-quarter 2020 positive earnings surprise of 35.9%. Earnings per share of 87 cents surpassed the Zacks Consensus Estimate of 64 cents. However, the bottom line compares unfavorably with $1.43 reported in the prior-year quarter.
Ally Financial (ALLY - Free Report) reported first-quarter 2020 adjusted loss of 44 cents per share, lagging the Zacks Consensus Estimate for earnings of 71 cents. The figure also deteriorated from the year-ago quarterly earnings of 80 cents per share.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>