OneMain (US:OMF)2023-10-25 18:33Financial Data and Key Metrics Changes - The third quarter net income was $194 million or $1.61 per diluted share, up 8% from $1.49 per diluted share in the third quarter of 2022 [19] - Capital generation was $232 million for the quarter, down from $280 million a year ago, reflecting impacts from the current macro environment [19] - Managed receivables finished the third quarter just shy of $22 billion, up $1.5 billion or 7% year-over-year [19] Business Line Data and Key Metrics Changes - Receivables from distribution channels totaled more than $650 million, with plans to continue building the auto purchase lending program in a disciplined manner [8] - The front book accounted for 59% of the total portfolio at the end of the third quarter, up from 50% a quarter ago, and is expected to represent approximately 65% of the portfolio by year-end [12] - Other revenue was $182 million, up $17 million or 10% from the prior year quarter, primarily driven by excess cash balances and higher yields [11] Market Data and Key Metrics Changes - The 30 to 89 delinquency rate finished the quarter at 2.98%, up 22 basis points from the second quarter, in line with normal seasonal trends [44] - Loan net charge-offs for the quarter were 6.7%, down from 7.6% in the second quarter, and in line with expectations [15][51] - The company expects full-year receivables growth of around 7%, driven by strong demand and contributions from new products and channels [10] Company Strategy and Development Direction - The company is focused on executing business with appropriate credit tightening actions while building for the future with credit cards, secured distribution channels, and digital capabilities [25] - The BrightWay card is designed to reward customers for positive credit behavior, with a graduation program for customers who maintain on-time payments [46] - The company continues to invest in technology and data science to drive growth in new products and channels [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's competitive positioning and ability to serve more customers with more products over time [25] - The company is navigating a challenging macroeconomic environment but remains focused on generating higher-quality loan business [10] - Management noted that the front book is performing in line with pre-pandemic benchmarks, while the back book continues to drive delinquency [58] Other Important Information - The company issued the largest ABS transaction in its history, raising nearly $3.5 billion in funding so far in 2023 [6] - The operating expense ratio was 6.8% in the third quarter, with expectations for the full year to be approximately 7.0% [22] - The company has a strong liquidity position supported by $7.4 billion of undrawn and committed bank facilities [23] Q&A Session Summary Question: What is the outlook for origination growth? - Management noted that demand for loan products remains strong, with originations totaling $3.3 billion, ahead of expectations despite credit tightening [14] Question: What are the expectations for net charge-offs? - Management expects full-year 2023 net charge-offs to be approximately 7.4%, with delinquency levels tracking in line with normal seasonal patterns [51] Question: How is the company managing its credit risk? - The company has implemented tighter underwriting standards since August 2022, focusing on high-quality loans and maintaining a cautious approach to credit [62] Question: What is the competitive environment like? - Management indicated that the competitive environment remains constructive, with the company able to book lower-risk customers at higher prices [87] Question: How is the company addressing the back book's performance? - Management acknowledged that the back book has higher delinquency due to seasoning, but expects improvements as the front book grows [81]