Sallie Mae Q3 Loss Widens on Lower NII & Higher Expenses, Stock Dips

Core Viewpoint - Sallie Mae (SLM) reported a wider-than-expected loss per share of 23 cents for Q3 2024, compared to a profit of 11 cents in the same quarter last year, primarily due to declining net interest income and rising non-interest expenses [1][2] Financial Performance - The net interest income (NII) for Q3 was $359 million, a decrease of 6.8% year over year, missing the Zacks Consensus Estimate by 1.1% [2] - The net interest margin (NIM) was reported at 5%, down 53 basis points from the prior-year quarter [2] - Non-interest income remained flat at $24 million year over year [2] - Non-interest expenses increased by 1.2% year over year to $172 million, driven by higher compensation and benefits, as well as FDIC assessment fees [2] Credit Quality - Provisions for credit losses were $271 million, down 37% from the prior-year quarter [3] - Net charge-offs for private education loans were $77 million, a decrease of 22.3% year over year [3] - The percentage of net charge-offs for private education loans held for investment was 2.08%, contracting 45 basis points year over year [3] Balance Sheet Position - As of September 30, 2024, total deposits were $21.4 billion, down 0.5% year over year [4] - Private education loans held for investment increased to $20.5 billion, up 0.6% from the previous year [4] - Private education loan originations rose by 13% compared to the year-ago quarter [4] Share Repurchase - In Q3, SLM repurchased 5.3 million shares for $115 million under its 2024 share buyback program [5] 2024 Outlook - The company expects diluted earnings per share to be in the range of $2.70 to $2.80 [6] - Total loan portfolio net charge-offs are anticipated to be between $325 million and $340 million [6] - Private education loan originations are projected to grow by 8-9% year over year [6] - Non-interest expenses are expected to be between $635 million and $655 million [7] Overall Assessment - The overall financial performance of Sallie Mae appears decent, with robust loan origination and lower provisions for credit loss being positive factors, while declining NII and rising non-interest expenses present near-term challenges [7]