Sallie Mae's (SLM) Q1 Earnings Beat Estimates, Expenses Rise

Core Viewpoint - Sallie Mae's first-quarter 2024 earnings per share of $1.27 exceeded expectations, driven by lower credit loss provisions, strong loan originations, and increased non-interest income, despite declines in net interest income and rising non-interest expenses [1][7]. Financial Performance - The company's GAAP net income reached $290 million, a significant increase from $119 million in the prior-year quarter [1]. - First-quarter net interest income (NII) was $387 million, down 4.4% year over year, but above the consensus estimate of $376.4 million [2]. - The net interest margin (NIM) decreased to 5.49% from 5.70% in the prior-year quarter [2]. - Non-interest income surged to $174 million compared to $22 million in the prior-year quarter, reflecting improvements across all components [2]. - Non-interest expenses rose by 3.1% year over year to $162 million, primarily due to increased compensation and benefits, along with FDIC assessment fees [2]. Credit Quality - Provisions for credit losses were significantly reduced to $12 million from $114 million in the prior-year quarter [3]. - Net charge-offs for private education loans were $83 million, a decrease of 1.2% year over year, with the charge-off percentage rising slightly to 2.14% [3]. Balance Sheet Position - As of March 31, 2024, total deposits were $20.9 billion, down 3.4% sequentially, while private education loans held for investment were $19.68 billion, showing a marginal sequential decline [4]. - Private education loan originations for the quarter were $2.6 billion, reflecting a 6% increase from the year-ago quarter [4]. Share Repurchase - In the first quarter, the company repurchased 1 million shares at an average price of $20.32 per share as part of its 2024 share buyback program [5]. 2024 Outlook - The company projects core earnings per share (non-GAAP) between $2.60 and $2.70 [6]. - Total loan portfolio net charge-offs are anticipated to be between $340 million and $370 million [6]. - Private education loan originations are expected to grow by 7-8% year over year [6]. - Non-interest expenses are forecasted to be between $635 million and $655 million [6]. Industry Comparison - Navient Corporation reported adjusted earnings per share of 63 cents, surpassing estimates, driven by increased other income and reduced expenses, despite a decline in NII [9]. - Ally Financial's adjusted earnings of 45 cents per share exceeded estimates but reflected a 45.1% decline from the prior year, impacted by lower net financing revenues and higher expenses [9].