Loan Originations Growth Aid Sallie Mae (SLM) Despite High Cost

Core Insights - Sallie Mae's rising average loan balance is driving net interest income (NII) growth, supported by strategic inorganic growth moves to expand operations and diversify revenue streams [1][2] - The company is a dominant player in the student loan lifecycle, benefiting from a low unemployment rate among college graduates and positive enrollment trends, indicating a strengthening demand for educational loans [1] - The company has seen a year-over-year increase in private education loan originations in Q1 2024, with a compound annual growth rate (CAGR) of 5.6% in NII over the past six years [2] Funding and Expenses - Sallie Mae relies on brokered deposits and retail deposits for funding private education loan originations, which poses refinancing risks due to the shorter average term of deposits compared to the loans [5] - Non-interest expenses have increased with a CAGR of 4.2% over the last five years, and this upward trend is expected to continue, potentially hindering bottom-line growth [5] Market Performance - Over the past six months, Sallie Mae's shares have increased by 11.2%, outperforming the industry growth of 7.4% [3]