Core Viewpoint - Investors in the Financial - Consumer Loans sector should consider OneMain Holdings (OMF) and Sallie Mae (SLM) for potential value opportunities [1] Group 1: Zacks Rank and Earnings Outlook - OneMain Holdings has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while Sallie Mae has a Zacks Rank of 4 (Sell) [3] - The Zacks Rank emphasizes stocks with positive revisions to earnings estimates, suggesting that OMF has an improving earnings outlook [3] Group 2: Valuation Metrics - OMF has a forward P/E ratio of 8.81, while SLM has a forward P/E of 8.84, indicating that both stocks are similarly valued in terms of earnings [5] - OMF's PEG ratio is 0.43, compared to SLM's PEG ratio of 0.77, suggesting OMF may offer better value considering expected earnings growth [5] - OMF's P/B ratio is 2.01, while SLM's P/B ratio is 2.69, further indicating that OMF is relatively undervalued compared to SLM [6] Group 3: Value Grades - OMF has a Value grade of A, while SLM has a Value grade of C, highlighting OMF's stronger position in terms of value metrics [6] - The combination of Zacks Rank and Style Scores suggests that OMF is the preferred choice for value investors over SLM [6]

Core Viewpoint - The analyst maintains a neutral [HOLD] rating on SLM Corporation (NASDAQ: SLM) due to its expensive valuation despite being a value-focused investor [1] Company Analysis - SLM Corporation's valuation is considered high, which affects the investment decision [1] - The analyst has over 3 years of active investing experience and has worked as a buy-side analyst at boutique research firms and family offices [1] Investment Strategy - The investment strategy focuses on identifying stocks that are undervalued and have near-term catalysts [1] - The investment horizon ranges from a quarter to two years, indicating a medium-term approach [1]

Core Viewpoint - The analyst maintains a neutral [HOLD] rating on SLM Corporation (NASDAQ: SLM) due to its expensive valuation despite being a value-focused investor [1] Company Analysis - The analyst's investment strategy focuses on identifying stocks that are undervalued and have near-term catalysts [1] - SLM Corporation was last analyzed after its 1Q25 results, indicating ongoing monitoring of the company's performance [1] Investment Horizon - The investment horizon for the analyst ranges from one quarter to two years, suggesting a medium-term perspective on potential investment opportunities [1]

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Core Viewpoint - OneMain Holdings (OMF) is currently viewed as a more attractive investment option compared to Sallie Mae (SLM) for value investors based on various financial metrics and rankings [1][3][7] Valuation Metrics - OMF has a forward P/E ratio of 9.60, while SLM has a slightly higher forward P/E of 9.61 [5] - The PEG ratio for OMF is 0.47, indicating better expected EPS growth relative to its price compared to SLM's PEG ratio of 0.84 [5] - OMF's P/B ratio stands at 2.19, which is lower than SLM's P/B ratio of 2.93, suggesting OMF is more favorably valued in terms of market value versus book value [6] Earnings Outlook - OMF holds a Zacks Rank of 2 (Buy), indicating a positive earnings outlook with recent revisions to earnings estimates, while SLM has a Zacks Rank of 3 (Hold) [3][7] - The stronger estimate revision activity for OMF further supports its position as a superior choice for value investors [7] Value Grades - OMF has received a Value grade of A, while SLM has a Value grade of C, reflecting OMF's more attractive valuation metrics [6]

Question-and-Answer SessionPeter GrahamExecutive VP, CFO & Treasurer Sure, sure. I think it's important to sort of reiterate our focus on originations is really around quality of originations, not just overall growth. Over the last couple of years, we've talked about the fact that we've continued to make sort of cuts at the margin to our credit underwriting to improve the overall quality of the book. By our estimate, over the last few years, that sort of, call it, 8 to 10 points of originations volume that ...

Question-and-Answer SessionPeter GrahamExecutive VP, CFO & Treasurer Sure, sure. I think it's important to sort of reiterate our focus on originations is really around quality of originations, not just overall growth. Over the last couple of years, we've talked about the fact that we've continued to make sort of cuts at the margin to our credit underwriting to improve the overall quality of the book. By our estimate, over the last few years, that sort of, call it, 8 to 10 points of originations volume that ...

Summary of Conference Call Company Overview - The conference call involved SLM Corporation, a leading private student loan lender, discussing its performance and outlook in the consumer finance sector, particularly focusing on student loans. Key Points Industry and Market Dynamics - The private student lending market is approximately $14 billion, with potential for growth, although it remains smaller compared to other consumer finance sectors like credit cards and auto loans [28][29]. - Legislative changes are expected to create new borrowing opportunities, particularly with Grad PLUS and Parent PLUS loans, which will phase in over the next few years [9][10]. Origination and Growth Guidance - SLM Corporation has adjusted its origination growth guidance from 6-8% to 5-6% due to softer demand and credit actions taken earlier in the year [5][6]. - The company has focused on the quality of originations, reducing volume by 8-10% over the past few years to maintain high credit quality [4][5]. Credit Quality and Underwriting - The company has tightened its credit underwriting standards, which has led to a higher quality of recent originations compared to previous years [17][46]. - The credit profile of Grad PLUS borrowers is expected to align well with SLM's underwriting criteria, indicating a good fit for expansion into this market [12][40]. Funding and Partnerships - SLM is exploring funding partnerships in the private credit space to create a more capital-light, fee-based revenue stream [14][15]. - The company aims to develop origination capabilities that are not reliant on the bank's balance sheet, which would mitigate capital market risks associated with loan sales [15][39]. Performance Metrics - The company reported a net interest margin (NIM) of approximately 5.3% and expects this to remain stable despite potential rate cuts [35][36]. - Long-term net charge-off targets remain in the high ones to low twos percentage range, supported by recent underwriting changes [26][40]. Borrower Assistance Programs - SLM has various loan modification programs aimed at assisting borrowers, with a high success rate for those in these programs for over a year [20][21]. - The company adjusted qualification requirements for modifications from 30 days delinquent to 60 days to better align with borrower behavior [22]. Employment Outlook for Graduates - Surveys indicate that recent graduates (2023 and 2024) maintain a confident outlook regarding employment, with no immediate concerns noted for the 2025 graduating class [23]. Capital Return Strategy - SLM's capital return philosophy includes using proceeds from loan sales to support share buyback programs and dividend growth, with a focus on maintaining a consistent capital-light revenue stream [42][44]. Competitive Advantages - SLM's competitive edge includes a large and experienced sales force, long-term relationships with educational institutions, and extensive data for informed decision-making [27]. Conclusion - SLM Corporation remains optimistic about its growth prospects in the student loan market, focusing on quality originations, strategic partnerships, and maintaining a strong credit profile while navigating the evolving regulatory landscape [26][45].

Investment Rating - The report maintains an "In-Line" investment rating for the industry, with a cautious view on midcap banks and a positive outlook for large cap banks [5][3]. Core Insights - The regulatory landscape for US banks is expected to undergo significant changes, with proposals for lower capital requirements likely to double excess capital and risk-weighted asset (RWA) capacity at large cap banks [1][4]. - The Federal Reserve is moving quickly on regulatory reforms, with a broad consensus anticipated on many proposals, including stress test transparency and GSIB surcharge adjustments [3][4]. - The expected increase in excess capital for large cap banks is projected to rise from $118 billion in Q2 2025 to $228 billion following the implementation of new regulations [7][9]. Summary by Sections Regulatory Changes - Key changes anticipated over the next year include lower stress capital buffers (SCBs) from the 2025 stress test, enhanced stress test transparency, and reforms to the GSIB surcharge and supplementary leverage ratio (SLR) [7][10]. - The Basel III Endgame finalization is expected to provide clarity for banks to optimize capital, supporting loan demand and capital markets activity [10][11]. Capital and RWA Capacity - Large cap banks currently have $118 billion of excess capital, which is expected to increase to $157 billion after a lower 2025 SCB, $172 billion post-SLR reform, and $228 billion post-GSIB surcharge reform [9][17]. - Incremental RWA capacity for large cap banks is projected to double from $0.9 trillion in Q2 2025 to $1.9 trillion following regulatory changes [9][19]. Earnings Impact - A sensitivity analysis indicates that optimizing excess capital could lead to a median increase of 24% in consensus 2026 earnings per share (EPS) across large cap banks, midcap banks, and consumer finance coverage [10][34]. - Regional banks are expected to benefit significantly from faster M&A approvals, which should enhance capital positions and growth opportunities [10][11]. Company-Specific Opportunities - Citigroup is projected to increase its excess capital from $16 billion to $31 billion post-GSIB surcharge reform, with significant buyback plans [32]. - Bank of America is expected to see its excess capital rise from $10 billion to $33 billion, with strong buyback potential and loan growth [32]. - JPMorgan Chase anticipates an increase in excess capital from $38 billion to $60 billion, benefiting from lower GSIB surcharges [32]. - Goldman Sachs is positioned to benefit from a rebound in capital markets, with expected buybacks of $17 billion in 2025 [32][33]. - Wells Fargo is projected to increase its excess capital from $13 billion to $34 billion, allowing for organic growth and share repurchases [32].

Core Insights - Sallie Mae (SLM) reported Q2 2025 earnings per share (EPS) of 32 cents, missing the Zacks Consensus Estimate of 49 cents, and down from $1.11 in the prior-year quarter [1][8] - The decline in EPS was attributed to higher provisions for credit losses, a decrease in non-interest income, and increased expenses, although net interest income (NII) showed a positive trend [1][10] Financial Performance - The company's GAAP net income was $71 million compared to $252 million in the prior-year quarter [2] - Second-quarter NII totaled $376.8 million, up 1.2% year over year, exceeding the Zacks Consensus Estimate by 0.5% [3] - The net interest margin for the quarter was 5.31%, a decrease of 5 basis points from the prior-year quarter [3] - Non-interest income fell to $26.8 million from $141.8 million in the year-ago quarter [3] - Non-interest expenses increased by 5.5% year over year to $167.2 million [3] Credit Quality - Provisions for credit losses rose significantly to $148.7 million from $16.8 million in the prior-year quarter [4][8] - Net charge-offs for private education loans increased by 17.5% year over year to $94 million, with a net charge-off rate of 2.36%, up 17 basis points year over year [4][8] Balance Sheet - As of June 30, 2025, deposits were $20.5 billion, reflecting a 2% sequential increase [5] - Private education loans held for investment reached $21.2 billion, up 14.8% from the prior-year quarter [5] - Private education loan originations slightly declined to $686 million compared to the year-ago quarter [5] Share Repurchase - In Q2, SLM repurchased 2.4 million shares for $70 million under its 2024 share buyback program [6] Outlook - The company reaffirmed its 2025 outlook, expecting diluted EPS of $3.00-$3.10 [7] - Total loan portfolio net charge-offs are anticipated to be 2-2.2% of average loans in repayment [7] - Private education loan originations are projected to grow by 6-8% year over year [7] Additional Insights - Overall financial performance appears decent with robust loan origination and an increase in net interest income being encouraging factors, despite the rise in provisions for credit losses posing a near-term challenge [10]