OneMain (US:OMF)2024-02-07 17:47Financial Data and Key Metrics Changes - In Q4 2023, net income was $165 million or $1.38 per diluted share, down 4% from $1.44 per diluted share in Q4 2022 [60] - Full-year 2023 net income was $641 million, with capital generation of $794 million [60] - Capital generation return on receivables was just below 4% [60] - Interest income for Q4 was $1.2 billion, up 6% year-over-year, driven by higher average receivables [62] - The average APR on loan originations increased to around 27% compared to 26% a year ago [61] Business Line Data and Key Metrics Changes - The auto finance business grew more than $350 million in 2023, reaching almost $750 million in receivables at year-end [50][57] - The credit card business grew to $330 million in receivables with 430,000 customers [50] - Fourth quarter originations totaled $3 billion, down 13% year-over-year due to tightened underwriting [52][61] Market Data and Key Metrics Changes - The delinquency rate for loans originated in the second half of 2023 is expected to be about 1%, while the overall portfolio has a delinquency rate closer to 4% [2] - The 30 to 89 delinquency rate at December 31 was 3.28%, with 90-plus delinquency at 2.88% [67] - The back book still represented 57% of delinquent receivables at year-end [68] Company Strategy and Development Direction - The company is focused on maintaining a conservative credit posture and has tightened its credit box throughout 2023 [46][61] - The acquisition of Foursight is expected to enhance access to franchise auto dealers and drive profitable growth in the auto finance business [50][57] - The company aims to invest in high-quality loans and new products while maintaining a strong dividend policy [58] Management's Comments on Operating Environment and Future Outlook - Management anticipates peak losses in 2024, with a range of 7.7% to 8.3% for full-year consolidated net charge-offs [3][79] - The company is confident in the performance of newer vintages and expects losses to peak as the back book runs down [70] - Management acknowledges the macroeconomic uncertainty but believes the company is well-positioned for growth once conditions stabilize [82] Other Important Information - The company generated nearly $800 million in capital in 2023, reflecting a strong business model [49] - Operating expenses for Q4 were $382 million, up 4% year-over-year, with an OpEx ratio of 6.8% [71] - The company ended the year with $1 billion in cash, providing significant funding flexibility for 2024 [74] Q&A Session Summary Question: Can you elaborate on the portfolio growth dynamics and how they affect delinquencies and losses in 2024? - Management discussed the impact of the pace of originations and the mix shift between front and back book on delinquencies and losses [86] Question: What is the confidence level and timeframe for returning to the target underwriting loss range of 6% to 7%? - Management indicated that achieving the 6% to 7% range is likely a 2025 event, depending on the performance of the back book [96] Question: Why is the allowance ratio stable despite an improving credit profile? - Management explained that the CECL model incorporates various assumptions, and the majority of first-half losses are expected from the underperforming back book [104] Question: How does the competitive environment look currently? - Management noted that the competitive environment has normalized, with a healthy respect for competition while maintaining a strong position in the market [108]