Sallie Mae's Profit More Than Doubles

Sallie Mae's second-quarter profit more than doubled, largely tied to a gain from the sale of $738 million of private-education loans.

Formally SLM Corp., Sallie Mae is one of the largest private student loan lenders in the U.S. with more than $9.2 billion under management at quarter's end, up 24% from the year earlier. In the latest period, Sallie Mae sold $384 million of private education loans, a 2% increase from the year-ago period, but raised its loan-loss provisions to $15.6 million from $1 million a year earlier.

Sallie Mae was created in 1973 as a government-sponsored enterprise, the former Student Loan Marketing Association. Last year, it was split into two firms: an education-loan manager known as Navient Corp. and a consumer-banking operation that continued under the Sallie Mae brand.

Total expenses were $91 million in the latest period, up from $75 million a year earlier, largely tied to the cost of establishing a stand-alone company following last year's spinoff, the company said.

Overall, Sallie Mae reported net income of $91 million, or 20 cents a share, compared with $44.1 million, or 10 cents a share, a year earlier.

Core earnings rose to 20 cents from 10 cents a share, in line with analysts expectations.

Net interest margin, a measure of a lender's profitability, rose 17 basis points to 5.49%.

Total loans delinquent, as a percentage of private education loans in repayment, were 1.70%, compared with 0.7% in the year-ago period and 1.65% in the previous quarter, according to regulatory filings.

Total loans in forbearance, which allows borrowers to reduce or stop monthly payments for up to a year even as interest continues to build, were 5.69%, compared with 0.9% last year and 2.76% in the first quarter. Sallie Mae said it had given a two-month disaster forbearance to all student loan borrowers who lived in an area of Texas impacted by floods this spring.

Sallie Mae Bank sold all loans past 90 days delinquent to an affiliate of what is now Navient ahead of the spinoff.

The company also affirmed its projections for the year.

Shares, largely inactive in late trading, closed Wednesday at $9.85, unchanged from the day before. The company's stock is down 3.3% this year.

Write to Maria Armental at [e-mail]

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