SLM Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Your credit -- your charge-offs did really well this quarter. I know you gave some color on the seasonality, and you continue to be pleased with the loss mitigation programs. Would you attribute most of that outperformance versus what you've seen over the last few years to the loss mitigation programs you're putting on? Or is there anything else we should be aware of under the hood? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 9:30PM, SLM.OQ - Q1 2025 SLM Corp Earnings Call And then any sort of early color or anything you're noticing or expecting from some of the impact to the government programs where recently, we saw the announcement that the government is intending to turn back on collections and wage garnishment for those in default and there's been a number that in the federal program have not been paying their loans for some time?

Question: Jeffrey Adelson - Morgan Stanley - Analyst : That's great. That's really helpful. Maybe the other side of that coin is some of the changes or forthcoming changes of the Department of Education are also maybe incentivizing some more activity from borrowers to go private. I'm just wondering if you're seeing any of that yet. And I know we're still waiting on changes in the plus programs potentially down the line, but are you noticing an uptick in graduate borrowers, maybe coming to you? Or maybe you could share any -- what percent of your originations are coming from graduate if that's increased at all?

Question: Terry Ma - Barclays Capital - Analyst : Just wanted to follow up on credit. The delinquency rate improved sequentially, but it was up 18 basis points year-over-year. A lot of that was driven by the early stage bucket, that bucket was pretty flat year-over-year the last two quarters. So any color on kind of what went on there?

Question: Terry Ma - Barclays Capital - Analyst : Got it. All right. So if I look at kind of your extended grace, there has been much higher usage over the last year. I guess like how should we kind of interpret that? And is there kind of any color that you can give on borrower behavior kind of once they exit extended grace? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 9:30PM, SLM.OQ - Q1 2025 SLM Corp Earnings Call

Question: Moshe Orenbuch - TD Cowen - Analyst : Great. Jon, I know that you mentioned that the growth of the balance sheet would kind of be driven or I should say, the amount of the loan sales would be driven by your balance sheet growth targets. Maybe if you could just kind of talk a little bit about now that the CECL is in the rearview mirror, the CECL phase in how you are thinking about both growth in the balance sheet and capital return?

Question: Moshe Orenbuch - TD Cowen - Analyst : Great. And then you did mention that expenses were down 4% year-on-year despite higher applications. And I know that kind of driving that better unit economics has always been part of the thesis. Can you just talk a little bit about what you've done to achieve that? And how sustainable is that? Or how you think about that going forward?

Question: Michael Kaye` - Wells Fargo - Analyst : EPS is off to a really good start this year, much higher than Q1 consensus estimates. [Even though kind of your] EPS guidance for the year was unchanged. Trying to figure out, is that just cautiousness as we're early in the year and maybe some pickup in macro uncertainty that's keeping the guidance unchanged or something else at play? And are you actually running ahead of plan thus far?

Question: Michael Kaye` - Wells Fargo - Analyst : Respect to the back to the buyback, it seems like it's off to a very slow start this year, just $31 million. I mean do you plan to come anywhere near close to completing that? I think it's [$272 million] that's left.

Question: Nathaniel Richam-Odoi - BofA Global Research - Analyst : Originations in the quarter were pretty solid, but I would have thought growth would have been a little faster given the share gains you made late last year and the strength we saw in two ways 2024. And I realize you're reiterating guidance for the full year, but just curious to hear your thoughts on how the quarter shook out versus your expectations? And like if you expect a relatively consistent growth rate from here or the normal step down that we probably expect from like from a year lapping that share gain?

Question: Nathaniel Richam-Odoi - BofA Global Research - Analyst : Got it. And then I want to go back to Moshe's question really quickly. The expense efficiencies were really solid in 1Q, but I'm just curious if you can give us some additional color on what the puts and takes for the full year outlook. And like what could put you to the high end of the range at this point? Is it like variability on the loan volumes you do in the fall season? Or is it other spending like investments in just marketing in general?

Question: John Hecht - Jefferies - Analyst : First question, I'm just going back to some policy stuff. I think we've all become aware of some headlines about some potential changes or reduction in funding of several large universities along with your sort of general government cutbacks on a lot of factors or segments. But I'm wondering if that happens, it seems like some of that would also -- some of that deficit would go to the private markets. Have you guys given that much consideration? And is there anything else we should be thinking about if that trend does occur? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 9:30PM, SLM.OQ - Q1 2025 SLM Corp Earnings Call

Question: John Hecht - Jefferies - Analyst : Okay. That's helpful. And then a second question, big sale this quarter and a really strong gain. I'm wondering the character of the buyers, has that been changing? I mean, I think we're all aware of the massive amount of flows in the private credit funds. Are you seeing a shift towards more bids from that group? Is it still -- or is it still kind of ABS more general credit buyers at this point?

Question: Richard Shane - JPMorgan - Analyst : Look, one of the things that's emerging is that the job market for graduating seniors is going to be a little bit more challenging this year than we've seen in the last four or five years. I'm curious when you might start to see that -- or how that plays through your numbers, is it something we would see in the third quarter? Or does it not really emerge until the following year if that becomes a challenge?

Question: Richard Shane - JPMorgan - Analyst : Got it. Okay. That's helpful. Look, it actually ties into the second part of my question, which is that I assume that the extended grace extended grace loans. Loans on extended grace period are particularly correlated to loans in the 1 to 12 months payment bucket, perhaps leaking into the 13 to 24. If we look at the growth in extended Grace, it's been about 2 times the growth of loans in the first 12-month bucket. Is that really a reflection of the change in policy? Is that what we should sort of expect to see going forward? Or is that starting to incorporate some of the economic factors that we're describing here?

Question: Richard Shane - JPMorgan - Analyst : Got it. I appreciate it. And as the parent of a graduating senior, I will embrace your enthusiasm for the market as it evolves. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 9:30PM, SLM.OQ - Q1 2025 SLM Corp Earnings Call

Question: Mark DeVries - Deutsche Bank - Analyst : Yes. How has student loan ABS traded since you did your loan sale? Any sense for what type of gain you would generate today, if you sold to the current spreads?