Slm Corporation ((SLM)) has held its Q4 earnings call. Read on for the main highlights of the call.
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SLM Corporation’s recent earnings call highlighted a robust performance in several key areas, despite facing some challenges. The sentiment during the call was generally positive, with a strong focus on loan originations and credit quality improvements. However, concerns were raised regarding earnings per share (EPS) not meeting guidance, a decline in net interest margin, and a slight increase in loan delinquencies. Nevertheless, the company remains optimistic about future growth and is committed to its capital return strategy.
Strong Loan Originations and Growth
Private education loan originations for the fourth quarter of 2024 reached $982 million, contributing to a full-year total of $7 billion. This represents a 10% increase over 2023, surpassing the revised guidance of 8-9% growth. This impressive performance underscores the company’s strong position in the private education loan market.
Improved Credit Quality
The company reported improvements in credit quality, with cosigner rates increasing from 87% in 2023 to 90% in 2024. Additionally, the average FICO score at approval saw an uptick from 748 to 752, indicating better creditworthiness among borrowers.
Capital Return Strategy
SLM Corporation continues to execute its capital return strategy effectively. In the fourth quarter, the company repurchased 2 million shares at an average price of $23.05. This action has led to a significant reduction in outstanding shares, down by 52% since January 1, 2020.
Preliminary Agreement on Loan Sale
A notable development during the call was the announcement of a preliminary agreement for the sale of approximately $2 billion in private education loans. The transaction is expected to close in early February 2025, marking a strategic move in the company’s operations.
Earnings Per Share Below Guidance
Despite the overall strong performance, the full-year GAAP diluted EPS fell slightly below the revised guidance, coming in at $2.68. This shortfall was attributed to pressures from reserves and operating expenses.
Net Interest Margin Decline
The net interest margin for the fourth quarter was reported at 4.92%, which showed a decline from previous quarters. This was primarily due to funding rates catching up to asset yields, impacting the margin.
Slight Increase in Loan Delinquencies
While there was a slight increase in loan delinquencies, with 3.7% of private education loans delinquent 30 days or more at the end of 2024, this figure was still an improvement from 3.9% at the end of 2023.
Guidance for 2025
Looking ahead, Sallie Mae provided guidance for 2025, projecting private education loan origination growth of 6% to 8%. The company anticipates total loan portfolio net charge-offs to be between 2.0% and 2.2% of average loans in repayment. Noninterest expenses are expected to range from $655 million to $675 million, with GAAP diluted earnings per common share forecasted to be between $3 and $3.10. This guidance reflects the company’s confidence in maintaining strong performance and strategic growth, while also considering potential impacts from external factors.
In conclusion, SLM Corporation’s earnings call conveyed a positive outlook, emphasizing strong loan origination growth and improved credit quality. Despite some challenges with EPS and net interest margin, the company’s strategic initiatives and forward-looking guidance suggest a continued focus on growth and capital management.
