Sallie Mae, the leading student loans company, reported robust third-quarter results in 2023, with increased demand from underclass students and a successful peak season. The company sold $1 billion of loans in October, keeping its earnings per share (EPS) guidance for the year intact. According to InvestingPro, Sallie Mae's management has been aggressively buying back shares, a move that signals the company's strong liquidity and capital positions. The proceeds from the loan sale will be used to buy back stock.
Key takeaways from the earnings call include:
- Private education loan originations in Q3 2023 were $2.5 billion, a 4% increase from the same quarter in 2022.
- Sallie Mae expects origination growth of 6-7% for the full year of 2023.
- The company's net charge-off rate for the first 9 months of 2023 was 2.44%, better than expected. The net charge-off rate is anticipated to be around 2.5% for the year.
- Steve McGarry will retire and be succeeded by Pete Graham as the new CFO.
- The company provided updated guidance for diluted non-GAAP core earnings per common share and expenses for 2023.
During the earnings call, Pete Graham, the incoming CFO, expressed his enthusiasm for joining Sallie Mae and his alignment with the company's mission. The company further provided guidance for 2023, with diluted non-GAAP core earnings per common share expected to be between $2.55 and $2.65.
The company also addressed its future plans, stating that while they are not in the business of buying other portfolios, they would not completely rule out the possibility. They emphasized that their primary use of resources is forming new customer relationships rather than acquiring existing ones. They also hinted at a potential pivot to growing their balance sheet in 2024, stating that organic balance sheet growth could enhance their valuation, improve their multiple, and reward shareholders.
Sallie Mae executives also discussed the company's expense growth and future plans. They highlighted their strategy of attracting customers through organic and content-based channels and their disciplined approach to underwriting and selecting customers. They do not anticipate an increase in consolidations or prepayment speeds due to the competitive rates and benefits offered by the federal loan program.
Jonathan Witter of Sallie Mae indicated that a return to normalcy in the business is not expected in the near future. He also mentioned that universities have returned to a more normal enrollment and price increase environment. The call concluded with Witter thanking everyone and mentioning that a replay of the call would be available on the Sallie Mae website.
According to InvestingPro data, Sallie Mae's market cap is at 2980M USD with a P/E ratio of 9.85. The company's revenue for the last twelve months was 1079.99M USD, showing a decline of 35.36%. Despite this, analysts predict the company will be profitable this year, with a return on assets of 1.15%. For more insights, you can check out the InvestingPro Tips which provide additional tips and real-time metrics.
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