DOW JONES NEWSWIRES
SLM Corp. (SLM) swung to a second-quarter loss as the lender
continued to suffer from dislocations in the credit markets.
Sallie Mae, as the company is commonly known, has been grappling
with surging defaults because of a weak job market. The lender is
also leading a fight against an Obama administration plan that
would end all private origination of student loans, though the loss
from that proposed measure would be blunted by the company's win of
a key loan-servicing contract from the U.S. Department of
Education.
The company Tuesday reported a loss of $122.7 million, or 32
cents a share, compared with year-earlier earnings of $265.7
million, or 50 cents a share. The latest quarter included $325
million of gains on debt repurchases, a $362 million provision for
private credit losses and a $105 million reduction of net interest
income caused by commercial paper market dislocation. Also excluded
from core earnings is $141 million of floor income.
On a core basis, earnings rose to 31 cents a share from 27
cents. Analysts polled by Thomson Reuters had expected per-share
earnings of 6 cents.
Total interest income dropped a third to $1.2 billion, while
total noninterest income plummeted 92% to $45 million.
Sallie Mae originated $3.7 billion in loans, up 53% from a year
ago. Originations of private education loans, which aren't backed
by the federal government, totaled $387 million as the company
implemented the new Smart Option Student Loan product and raised
credit standards.
The lender charged off $355 million of managed private education
loans during the second quarter, up from $202 million in the first
quarter.
The company's loan-loss provision was $278.1 million,
essentially double a year earlier and up 11% from the first
quarter.
Shares of SLM fell 2.9% to $9.23 in after-hours trading. The
stock has nearly doubled in the past three months, but it is still
well off levels seen before the financial crisis hit last year.
-By Jay Miller, Dow Jones Newswires; 212-416-2355;
jay.miller@dowjones.com