Sallie Mae Closes Asset-Backed Securitization, Shares Up


Shares of Sallie Mae (SLM) gained 1.4% following the company’s announcement that it has completed its first asset-backed securitization as a standalone consumer banking business and entered into a deal for its first loan sale.

Sallie Mae started operating independently as a consumer-banking company focused on offering private education loans, saving and insurance products for higher education to students and families following the separation of SLM Corporation into two distinct publicly-traded entities on Apr 30, 2014. The loan management, servicing and asset recovery businesses of the pre-split company remained with the other public company – Navient Corporation (NAVI).

Sallie Mae’s off-balance sheet securitization included around $380 million of Smart Option Student Loans that were privately placed with a single, third-party investment manager.

In line with its new business model, Sallie Mae also inked an agreement to sell around $820 million of Smart Option Student Loans to Navient. The sale is expected to close this month. In its second-quarter 2014 earnings release, Sallie Mae mentioned that it expects private education loan sales of $1.2 billion for the later part of 2014.

Sallie Mae delivered a positive earnings surprise in its standalone financials for second-quarter 2014. Core earnings of 10 cents per share outpaced the Zacks Consensus Estimate by a penny. However, results compared unfavorably with 17 cents earned in the year-ago quarter. As of Jun 30, 2014, the private education loan portfolio stood at $7.4 billion, up 40% year over year.  (Read more on second-quarter results: Sallie Mae (SLM) Beats Q2 Earnings Estimates on Higher NII )

Sallie Mae currently carries a Zacks Rank #3 (Hold). Some-better ranked stocks in the finance space include Cohen & Steers Inc. (CNS) and Provident Financial Holdings, Inc. (PROV). Both the stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SLM
Read the Full Research Report on CNS
Read the Full Research Report on PROV
Read the Full Research Report on NAVI

Zacks Investment Research

View Comments (0)