Salliemae(US:SLM)2022-10-27 22:27Financial Data and Key Metrics Changes - GAAP diluted EPS for Q3 2022 was $0.29, up from $0.24 in the same quarter last year [6] - Net interest income for the first nine months of 2022 was $1.1 billion, higher than the previous year despite slightly lower loan balances [7] - Total provision for credit losses was $208 million in Q3 2022, an increase of $177 million from the prior quarter [17] Business Line Data and Key Metrics Changes - Private education loan originations for Q3 2022 were $2.4 billion, a 13% increase compared to Q3 2021 [9] - The co-signer rate for Q3 2022 was 89%, slightly up from 88% in Q3 2021 [9] - The private education loan reserve was $1.3 billion, or 5.5% of total student loan exposure, up from 5.2% a year ago [14] Market Data and Key Metrics Changes - The company experienced a 15% increase in underclassmen application growth, contributing to overall application growth of 13% [9] - Private education loans delinquent for 30-plus days were 3.7%, unchanged from Q2 2022 but up from 2.4% a year ago [18] Company Strategy and Development Direction - The company is focusing on strengthening its core business and maximizing brand value, evidenced by strong origination growth and well-managed operating expenses [22] - The acquisition of Nitro College is expected to enhance direct-to-consumer marketing capabilities and broaden data collection [22] - The company has decided to exit the credit card business to focus on more profitable opportunities [23] Management's Comments on Operating Environment and Future Outlook - Management remains confident that the factors driving higher charge-offs in 2022 will normalize by the start of 2023 [12] - The macroeconomic environment is volatile, but the company does not see a weakening of its core portfolio [24] - The company expects to continue its share buyback strategy while managing capital reserves effectively [46] Other Important Information - The company ended Q3 2022 with liquidity of 23.2% of total assets and total risk-based capital at 14.6% [21] - The effective tax rate for Q3 2022 was 28.2%, higher than the previous year due to lower than expected tax credits [20] Q&A Session Summary Question: Future loan growth and gain on sale sustainability - Management indicated that predicting market conditions is challenging, but they expect a continued positive relationship between loan sales and share buybacks [29][30] Question: Behavior of students returning to school and prepayment speeds - Management noted that the pandemic's impact on student behavior varies by region and that slower prepayment speeds are viewed positively for the business [34] Question: Credit card business exit and potential for positive mix shift - Management acknowledged that consolidations have not been a significant part of their business and do not expect a material change in credit metrics due to the exit from the credit card space [39] Question: Insights on loan sale auction process - Management shared that interest in loan sales has increased, attracting a diverse range of buyers, including insurance companies and hedge funds [41] Question: Funding strategy and deposit growth - Management confirmed that their funding strategy relies on deposits for 80% of funding and plans modest balance sheet growth in the coming years [49]