Friday, The Student Loan Corp. (STU) reported a 41% decrease in the net profit for the second quarter, reflecting the continued narrowing in the spread between CP and LIBOR rates. The decline was, however, partially offset by gains on loan sales and lower operating expenses, stated the company.
For the quarter, net earnings plummeted to $24.95 million or $1.25 per share from $42.02 million or $2.10 per share in the prior-year period.
Net interest income was reported as $70.88 million against $119.39 million last year. After adjusting provision for loan losses, net interest income slid to $26.06 million from $73.56 million a year ago, reflecting a compression in margin. The margin compression was due to the continued dislocation between commercial paper rate, the rate at which a significant amount of the company's student loans earn income, and LIBOR,which is the basis of a majority of the company's funding.
The Stamford, Connecticut-based company's other income for the period increased to $48.72 million from $41.13 million in the same period last year, reflecting an increase of $17.0 million in the gain on sale related to the sale of loans to the Department of Education under the Purchase Program.
During the quarter, Student Loan further diversified its sources of funding by accessing $8.5 billion of secured borrowings from the U.S. Department of Education sponsored conduit, Straight-A Funding, LLC. The company said it has completed a $1.2 billion sale of loans to the Department of Education through the Loan Purchase Commitment Program, in the second quarter and that the sale proceeds were used to pay back the funding from Participation Program.
The effective tax rate during the quarter was up to 36.9% from 33.1% last year.
For the six months ended June 30, 2009, net income was $32.48 million or $1.62 per share, compared to $57.25 million or $2.86 per share in the prior year.
Net interest income, for the first half, decreased to $128.96 million from $200.84 million and the net interest income after provision for loan losses was $62.99 million when compared to $129.70 million last year. Other income rose marginally to $55.67 million from $54.05 million in the comparable period prior year.
In the twelve-month period ended June 30, 2009, the company's managed student loan portfolio rose by 9% to $43.0 billion. The managed portfolio includes $26.6 billion of its owned loan assets and $16.4 billion of loans serviced on behalf of securitization trusts or other lenders.
On July 15, the board declared a regular quarterly dividend of $0.35 per share, payable on September 1, 2009 to shareholders of record on August 14, 2009.
STU is currently trading at $42.75 per share, up 0.78%, on the New York Stock Exchange.
For comments and feedback contact: editorial@rttnews.com
June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.