Sallie Mae (SLM), formally known as SLM Corp., Wednesday reported a better-than-expected jump in first-quarter profit, as the education finance provider incurred lower derivative losses and gained from the sale of a residual interest in a federal loan securitization trust.
Net interest income for the quarter edged down 2 percent from last year, due to a decline in average Federally Guaranteed Student Loans, or FFELP outstanding. This was partly offset by lower loan-loss provisions even as the quarter was marked by sturdy growth in loan origniations.
Sallie Mae raised its core earnings outlook for fiscal year 2013, mainly to reflect the contributions, earlier this year, from two FFELP loan securitization trust residual sales.
"I am optimistic about our prospective credit costs, though we will watch the next several months with some caution. While the economy and employment levels are still uncertain, capital markets liquidity has improved," said Chief Executive Albert Lord.
Newark, Delaware-based Sallie Mae reported first-quarter profit of $346 million or $0.74 per share, compared to $112 million or $0.21 per share last year, when it incurred derivative losses of $372 million.
Excluding items, core earnings for the quarter were $283 million or $0.61 per share, compared to $284 million or $0.55 per share in the prior year. Results include a $55 million gain from the sale of the residual interest in a FFELP loan securitization trust.
On average, 8 analysts polled by Thomson Reuters expected earnings of $0.59 per share for the quarter. Analysts' estimates typically exclude special items.
Sallie Mae said its net-interest income for the quarter edged down 2 percent to $795 million from $811 million a year ago. Total other income for the quarter was $277 million, compared to a negative $108 million last year, when it incurred derivative losses.
Provisions for loan losses for the quarter decreased 5 percent to $241 million from last year.
At consumer lending segment - which originates, finances and services private education loans - loan originations jumped 22 percent from last year to $1.4 billion, while the charge-off rate remained unchanged at 3 percent. Core earnings at the segment climbed to $88 million from $84 million.
During the quarter, Sallie Mae repurchased 10 million shares of common stock for $199 million. The repurchases were under a February 2013 program that authorizes up to $400 million of buyback.
For fiscal year 2013, Sallie Mae estimates core earnings of $2.49 per share, up from prior guidance of $2.30 per share. Analysts currently expect earnings of $2.35 per share.
The company continues to expect private education loan originations of at least $4 billion for the year.
SLM closed Wednesday at $20.37, down 2.18%, on a volume of 4.8 million shares on the Nasdaq. In after hours, the stock gained 0.15%.
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