Sallie Mae Profit Falls; Stock Down - Update

(RTTNews) - Student loan provider Sallie Mae (SLM), formally known as SLM Corp., Thursday reported a decline in fourth-quarter profit, hurt by derivative losses, operating expenses and lower net interest income, partly offset by a drop in loan-loss provision. While quarterly earnings missed Wall Street estimates, revenue came in above expectations.

Sallie Mae shares dropped 4.8 percent in after-hours trade on the Nasdaq.

Newark, Delaware-based Sallie Mae posted fourth-quarter net income to common stock of $265 million or $0.60 per share, compared with $343 million or $0.74 per share last year.

Results for the quarter included derivative losses of $128 million, compared with losses of $28 million last year.

Excluding items, core earnings for the quarter were $275 million or $0.61 per share, compared with $257 million or $0.55 per share in the prior year.

On average, eight analysts polled by Thomson Reuters expected earnings of $0.73 per share for the quarter. Analysts' estimates typically exclude special items.

Net-interest income for the quarter dropped to $789 million from $832 million last year.

At consumer lending segment - which originates, finances and services private education loans - loan originations edged up 2 percent from last year to $524 million, while the annualized charge-off rate fell to 2.9 percent from 4.2.

Core earnings at the segment climbed to $114 million from $45 million, mainly as provision for private education loan losses dropped to $180 million from $296 million a year ago.

Core earnings at Business Services segment climbed to $184 million from $135 million in the prior year. Core earnings at Federally Guaranteed Student Loans, or FFELP, declined $7 million to $82 million.

Results were also impacted by operating expenses that climbed to $305 million from $226 million a year ago. This was due mainly to the allocation of $70 million for expected compliance remediation efforts related to pending regulatory inquiries.

At December 2013, the company held $104.6 billion of FFELP loans, compared with $125.6 billion in the prior year.

Sallie Mae said it is on track to separate itself into two public companies in a bid to propel growth and enhance shareholder value. In May, the company announced plans to separate its consumer banking and education loan management operations and complete the separation in the first half of 2014.

For fiscal 2014, the company expects full-year 2014 private education loan originations of $4 billion.

Sallie Mae closed Thursday at $27.14, down $0.10 or 0.37%, on a volume of 3.4 million shares. In after hours, the stock dropped $1.30 or 4.79% at $25.84.