Sallie Mae (SLM) leads fourth quarter earnings, to buy Nitro College – January 27, 2022
Sally Mae (SLM – Free Report), formerly known as SLM Corporation, reported basic earnings per share of $1.05 in the fourth quarter of 2021, which beat Zacks’ consensus estimate of $1.01. Net income compared unfavorably with $1.15 reported in the prior year quarter.
SLM’s results benefited from improved fee income and net interest margin (NIM) expansion. Private education loan originations were also decent in the quarter. However, an increase in expenses and a deterioration in the balance sheet position posed significant detrimental factors.
The company’s net income applicable to common shares was $305 million, compared with $431 million in the year-ago quarter.
For the full year, earnings per share were $3.67, which compares favorably to earnings per share of $2.23 the previous year. The same broke the consensus mark of $3.57. Net income available to common shareholders was $1.2 billion, compared to $871 million in 2020.
Net interest income (NII) improves, expenses climb
In 2021, the NII was down 5.8% from the previous year’s level at $1.39 billion. Additionally, the reported figure missed Zacks’ consensus estimate of $1.41 billion.
NII in the fourth quarter was $367.4 million, up slightly year-over-year. However, the reported figure missed the Zacks Consensus estimate of $381.9 million. The NIM rose to 5.13% from 4.82% in the prior year quarter.
The company’s non-interest revenue was $152.8 million, up significantly from the year-ago quarter. The increase is mainly due to the increase in other income and the net gain on the sale of loans.
Sallie Mae’s non-interest expense rose 1.3% year-over-year to $125.5 million. The increase was primarily due to higher FDIC appraisal fees and other operating expenses, offset by lower costs due to compensation and benefits.
Credit quality: a mixed bag
The company recorded a provision for credit loss profit of $15 million against expenses of $316 million in the year-ago quarter.
Defaults as a percentage of private education loans in repayment were 3.3%, down from 2.8% in the year-ago quarter.
Loans and deposits Decrease
As of December 31, 2021, Sallie Mae’s filings were $20.8 billion, down 0.3% sequentially.
Private education loans held for investment were $19.6 billion, down 4.6% sequentially. During the quarter, the company recorded loans of $737 million for private education.
Enhanced Capital Deployment Activities
In the fourth quarter, the company repurchased 14 million common shares for $263 million under its share buyback programs.
Sallie Mae’s Board of Directors also approved a share repurchase authorization of $1.25 billion, expiring January 25, 2024. The amount is in addition to the remaining authorization of $26 million (as of January 25, 2024). January 2022) under the 2021 share buyback program.
The company expects basic earnings per share (on a GAAP basis) of $2.80 to $3.
It projects total net loan portfolio write-offs of $255 million to $275 million.
Private education loans are expected to grow 8-10% year-over-year.
The company’s non-interest expenses are expected to be between $555 million and $565 million.
Sallie Mae remains focused on introducing several complementary products and improving efficiency. With this in mind, the company has also entered into a definitive agreement with Epic Research LLC to purchase Nitro College, a digital marketing and education solutions company.
Management noted that the agreement “will complement our core business, delivering innovative and enhanced digital capabilities that significantly amplify our efforts to become an education solutions provider that helps students navigate their journey with confidence.” in higher education”.
We believe improving economic conditions will further help Sallie Mae maintain its leadership position in the student loan market. Robust capital deployment activities are likely to boost its share price going forward.
Currently, the company carries a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other financial stocks
Texas Capital Bancshares (TCBI – Free Report) reported adjusted earnings per share of $1.19 for the fourth quarter of 2021, beating Zacks’ consensus estimate of 91 cents. Additionally, the results compare favorably to the $1.14 in the prior year quarter.
Capital strength and lower expenses were the drivers for TCBI. In addition, the provision for credit losses recorded benefits. Still, a decline in NII and commission income as well as reduced margins were deterrents. Additionally, results from Texas Capital reflect lower loan and deposit balances.
Webster Financial (WBS – Free Report) reported adjusted earnings per share of $1.31 for the fourth quarter of 2021, which beat Zacks’ consensus estimate of $1.10. The published figure excludes notable items, such as merger-related charges, strategic optimization and debt prepayment expenses.
Rising NII and commission income boosted Webster Financial’s results. In addition, lower costs, growth in loan balances and impressive capital ratios have been positive. In addition, the release of reserves during the quarter was a tailwind. However, the decline in the NIM and the deposit balance were the main concerns for WBS.
Synovus Financial (SNV – Free Report) reported adjusted earnings of $1.35 per share in the fourth quarter of 2021, which beat Zacks’ consensus estimate of $1.1. In addition, net income compares favorably to earnings of $1.08 per share recorded in the prior year quarter.
Synovus’ results were driven by higher NII and commission income, lower expenses and reversal of provisions. SNV’s strong loan and deposit balances fueled organic growth. However, the shrinking NIM and deteriorating capital position were the undermining factors.