Sallie Mae outlines $3.20–$3.30 EPS target for 2025 with new partnership strategy amid peak loan origination growth

Earnings Call Insights: SLM Corporation (SLM) Q3 2025

MANAGEMENT VIEW

* Jonathan Witter, CEO, highlighted three core messages: "First, we delivered a successful quarter and peak season. Second, we're pleased with our year-to-date performance and believe we have real momentum that will carry us through the rest of the year. And third, we're optimistic about the long-term outlook for private student lending and the growth of Sallie Mae."
* Witter reported "GAAP diluted EPS in the third quarter was $0.63 per share. Loan originations for the third quarter were $2.9 billion, representing 6.4% growth over the year ago quarter and 6% growth year-to-date."
* Witter noted the completion of the sale of approximately $1.9 billion in loans, generating $136 million in gains, and the repurchase of 5.6 million shares at an average price of $29.45 per share.
* Witter stated, "We are looking forward to sharing more at a second investor forum later this year" about a new partnership in the private credit space, aiming to expand capital-light, fee-based revenues.
* Peter Graham, CFO, reported, "For the third quarter of 2025, we earned $373 million of net interest income. This is up $14 million from the prior year quarter. Our net interest margin was 5.18% for the quarter, 18 basis points ahead of the year ago quarter with 13 basis points behind the prior quarter given the drag from the initial liquidity that we hold to satisfy the requirements of peak season."
* Graham added, "Our provision for credit losses was $179 million in the third quarter, down from $271 million in the prior year quarter. This was largely due to $119 million of provision release resulting from the third quarter loan sale."

OUTLOOK

* Witter provided updated guidance: "We now expect our GAAP earnings per common share for 2025 to be between $3.20 and $3.30. At the same time, we are reaffirming all other elements of our 2025 outlook, including originations growth, net charge-offs and noninterest expense metrics, reflecting continued confidence in our strategic trajectory."
* Witter noted the expectation to "sell both a small portfolio of seasoned loans and a portion of our recent peak season originations either in the fourth quarter or early in 2026."

FINANCIAL RESULTS

* Witter reported "Private education loan net charge-offs in Q3 of '25 were $78 million, representing 1.95% of average private education loans and repayment, down 13 basis points from the year ago quarter."
* Graham stated, "Our total allowance as a percentage of private education loan exposure modestly improved to 5.93%, slightly below the prior quarter's 5.95% and just 9 basis points above the year ago quarter."
* Noninterest expenses were $180 million compared to $167 million in the prior quarter and $172 million in the year ago quarter, aligning with full year outlook.
* Liquidity ratio at the end of the quarter was 15.8%, total risk-based capital was 12.6%, and common equity Tier 1 capital was 11.3%.

Q&A

* Moshe Orenbuch, TD Cowen, Research Division: Asked about delinquency trends and forward outlook. Graham responded, "We've been really pleased with the performance of the loan mod programs... we expect to continue to see stability in the late-stage delinquencies and our roll rates."
* Orenbuch inquired about terms of the upcoming sale. Graham replied, "We're still in final -- sort of the final stretch of the deal coming together, and we'll release appropriate level of detail when we complete that."
* Jeffrey Adelson, Morgan Stanley: Questioned higher percentage in 12-month mods and their roll-off. Graham stated, "We're happy with the performance of people in the mods... we're optimistic as we look to those sort of first graduating wave from these that will have a high degree of success."
* Mark DeVries, Deutsche Bank: Asked if delinquencies and charge-offs might trend higher. Witter answered, "I sort of consider delinquencies to be sort of plus or minus flat within sort of normal operational variability that we're seeing in the book... we feel pretty comfortable about the roll rates being consistent and flat and the performance of the mod."
* Terry Ma, Barclays: Inquired about correlation between delinquencies and charge-offs. Graham said, "The combination of the loan modification programs we put in place are going to behave as we intended... stable levels of late-stage delinquency and the roll rates are stabilized as well."
* Donald Fandetti, Wells Fargo: Asked about ABS market volatility and gain on sale margins. Graham explained, "We've done over time, pretty successful loan sales over a multiyear period in kind of that sort of mid- to high single-digit range... it's really tied to kind of where spreads are in general."

SENTIMENT ANALYSIS

* Analysts focused on credit quality, delinquency trends, and details of the new strategic partnership, often pressing for further clarity on potential risks and the structure of the upcoming deal. The tone was slightly negative, indicating concern about rising delinquencies and future charge-offs.
* Management maintained a confident and measured tone during both prepared remarks and Q&A, reiterating stability in credit performance and emphasizing strategic flexibility: "We are confident in sort of the long-term through-the-cycle sort of metrics that we laid out before."
* Compared to the previous quarter, the analyst tone shifted from moderately optimistic to more cautious, with increased scrutiny on credit and partnership execution. Management's tone remained consistently confident but increasingly focused on defending their strategy amid external uncertainty.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter reflected higher loan originations and share repurchases versus Q2. Noninterest expenses edged higher but remained in line with guidance.
* Strategic focus shifted toward executing a new private credit partnership, with Witter signaling a pending announcement and greater emphasis on capital-light growth.
* Guidance for GAAP EPS was updated to a $3.20–$3.30 range for 2025, while other targets were reaffirmed. In Q2, management maintained broader guidance and expressed optimism about the impact of federal reforms.
* Analyst questions in Q3 centered on credit quality, delinquency migration, and the structure of the new partnership, reflecting heightened concern compared to Q2's emphasis on federal reform opportunities.
* Management's confidence remained consistent, though the defense of credit quality and partnership details was more prominent in Q3.

RISKS AND CONCERNS

* Graham described a "year-over-year increase" in delinquencies as "largely attributable to changes we made last year to our loan modification eligibility criteria."
* Management acknowledged "economic ambiguity" but stated, "we have not observed any material change in our borrowers' ability to meet their obligations."
* There is ongoing scrutiny of how the shift to holding loans for sale and partnership structures will affect earnings and risk exposure.

FINAL TAKEAWAY

SLM Corporation delivered a quarter marked by robust loan origination growth and solid credit performance, while reaffirming its strategic direction with a new private credit partnership on the horizon. The company updated its 2025 GAAP EPS guidance to a range of $3.20 to $3.30 and emphasized continued confidence in credit stability, disciplined underwriting, and capital return to shareholders. Management signaled that further details on the partnership and future growth initiatives will be unveiled at an upcoming investor forum, positioning the company for sustainable, capital-efficient expansion in the evolving private student lending landscape.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/slm/earnings/transcripts]

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