SLM - Earnings call transcript Q4 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is April and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter Sallie Mae Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. Instructions]. [Operator you. Thank turn President now over Brian to I Investor the Relations. Vice of Cronin, would call Sir, begin. you may

Brian Cronin

Thank you today April. CFO. up Mae’s our fourth the Good and After morning and XXXX CEO questions. we call. welcome the earnings call prepared With will McGarry, for me Steve is remarks, Quinlan, quarter Ray our to open Sallie

This future the Before and could should those statements. Actual forward-looking the predictions, expectations we begin, and a than SEC. to keep due refer Form with those different in in be mind on may the variety our discussed Listeners XX-Q materially the company’s filings here. discussions discussion will contain factors. factors be results other of of to

Investors core to earnings. full the with description earnings, call, you. a earnings posted press over measures, release supplement found December can the turn core GAAP This XXXX. to A the this for non-GAAP refer at quarter call the During Ray. along conference earnings the will our we of reconciliation XX, our will in now be page call GAAP salliemae.com. is and results ended to on measures I we Thank

Raymond J. Quinlan

and Today will is performance then have regard as focus what in to through the that you morning of do tradeoffs little the thank we year, we especially indicators made some the I of talk investments. the outcome, XXXX and Good run for look a all about Brian. bit on at some

target gain guidance the the think had in volume $X.X dispersed in quarter. at end back private loans So, newly share. as the after we to We which third -- The first. billion we start our came did volume of adjusted statement on market about been the income of always student

know and that them Particularly rate indicator. product by at product take have regard multiple level. to last we a year our from as efficiency a year both they about million parent as year we approve a the so $XX steady all Parent and through you acceptance well got to start, we half was loan and the about about through particularly We took as gratifying the and this about an competitive look introduced a now volume high and reasonable of products loan. step off dispersed moved a our year. say we customers to million year pricing more one than third one as dispersement indicator is and doubled have XX% elasticity that pricing was that at growth characteristics Our thought good market should this moving XX if as in for not so which first $XX to delta, of remained has I of fully the of million did increase total to increase ago years our

talked into to able hands we've maturation marketing, the that the right are we increase the has that of still get as product, the gratified This season us and over so sales and it to confidence gives look we and of good people, the And shows the graduate about. and six occurred new introduce that progress. coordination XXX% next introduction in some is busy products between

product right where so we all offerings. distribution the competitive on question get with that space is and opportunity current is And there's thinking than the these into those a world can and that government more in we're of an the we and wide think hands our handle

about to you X disbursements we billion the year we look a X.X billion go total As to to up increase. X% next from know as expect

end we a mid XX's. as are more piece that We're as talk look looking approval kept last both we portfolio of Second, people quality not in credit we remains We're or morning. and down the volume front high. than about which have which remain accepting. rates for XXX at through well average FICO turning we'll high the quality

to one here credit rate or said Always see XX%. you anti-select I take at in remains Our as not whether certainly not. getting if we looks are are

so NIM, their as shareholders both as level. for yield of pricing portfolio is very is customers The sheet our the is and Next the at attractive, extremely our more balance efficient. well high X%

multiple we standpoint. have We funding of have a a source rich from sources, portfolio funding

overall as cost We the ratio sure as used think growing characters fairly and company when we have a try by third that we but growth being make level. operating that guide improved measure within Then EPS efficiency sustainable us efficiency and looks as X% to discuss year guardrails will misled like are each growth. its to I the that of but funds Steve about one talk a of will the we to in terms the of

our track you know has a efficiency very record. As ratio attractive

to Going to efficiency XX% to had and XX% XXXX. XXXX, in in XX% XX.X% through in XXXX, back in XXXX, XXXX XXXX XX% we're guiding we and number XX% ratio in a XXXX,

we've performance. particular expenses up Revenues five measure is So which one the this ratio fraction the continuous growth years portfolio. XX.X% is XX.X%, the improvement think increase improved In the operating made of credit clearly performance and of an in math allows particular to a over us steady efficiency XXXX despite up key have a however we In the on obviously which were growth in us. a of were for warranted course we XX% expenses. in have to regard OPEX given

as delinquency as at that the improved discussed As third had the Texas especially the which country of about to Florida. several weather issues occurred quarter X.X% areas the the but the end we from and disasters we time of talking operating that in that summer know well you over

as gone thought it down And ratio so would. we the has

by the that $X.X needed or fact this entered and year. receivable Of full continues portfolio of is of it lifted mature billion $X.X course to the funding billion P&I

$X.X right on continues as well both ratio, in the the our is delinquency get delinquency that delinquency sheet models. into to from people just an subset efficiency And billion, absolute to XX.X XXXX, from the grew the move that will a In but increase an perspective the to private maturation growth it of the grew regard a billion so XX.X years $XX.X balance two loan with X.X as of $XX.X increase of billion. billion. as to and student the or matter balance The we portion XXXX of over sheet along from as be see

close have we $XX private to billion time the out period the in student continues which was comes balance on a to that our this of when growing very sheet $XX a billion. All this ending over which is through EPS. balance the So spun the growth XXX% of of loan show we from efficiency sheet growth to strainer also year

excellent our results. EPS ratio very Our story consistent time good a is efficiency similar over one story, to and with

balance the XXXX, guidance EPS the From the for we from we've going of Financial where that that year FDIC, increase told will sheet say another a compounding $X.XX on well the with in be XX's high regulatory also growing to the $X.XX efficiency is happy consistently you say we Utah and in the our I'm XX CFPB. this. teens. good So years. level up realize year Department next XXXX regulators forward. would over to UDFI. period with EPS that regulators is high good to to years a we the over even, basis even we XXXX with and a company In and levels, while XXXX as bank our XX% a The key over relationships in next was the the share. increase with ongoing and all good XX% of to while Institutions the we ROE have our them us three from and to have Consistent, went let's FDIC expect as shared horizon as had did hit over regard the XXX% allow is forecast maintain We chief the to ROE third very both range diversifying. $X.XX share another $X.XX from our And to three The the relations increase. XX% have or

that good on lots industry. a partners evolution customer, regulatory doing say competition, I'm carping and them. includes and to We happy are as front a transparent fact market we have in a for the the XXX% we're that regard In the the there's with which They frame quite partnership despite positive us of been well.

Our in customer from you as XXXX per in satisfaction to application dramatic the to customer that account that down are are calls order XX% more levels up. actually bring whilst fruition our customer terms, per XX% application in to have so at service per continues dramatically, improve The while is serviced account terms down and dropped say to going absolute in XXXX. calls required

intervention. million XX% XX do of will them have human XXXX, transactions We in will no customer

Fin automated highly in a are We sense. Internet driven that Tech

will So, the outlook as continue. then we to look we

four refinement last Our has story end expansion, the two three establishment operating and a four growth, of years that five strong with separation, this piece, been market of We now line diversification. year position. first the over company,

We have about. valuable segment we'll which talk extremely an customer

balance very of originators loans us sheet into allowed has from we'll which strong personal in have venture minute. a that talk a purchase and We to other the about

sheet had has have billion to with delivery approximately balance XX XXXX margins and as the controlled end capabilities, of proven profitability. the gone have We excellent from growth we XX billion

service improving. customer and great have We

a promising years to building We realize these be will on of success future.

reduction. to since allowed student increase to look We've loan the and call the XX next is $X.XX its tax on As us more income to trajectory go In to has a billion the evaluate well major in the a range with for three. that for to has the you that as us has consistent hit are series year. is within for as of focus last know earnings positively originations been downward and regard ratio firm. XX investments to growth efficient change statement XX% the the guidance change. for at private from to $X to EPS change to dropping chosen the a continue ROE to and very efficiency to this $X.XX Tax It

in see back to million perpetuity technology looks is will so in long ROE cloud. after as triple controlled this an IT ROE you to The our you as million know. would a as as forward to both measured an and of working is two it going a to $X pay do First, in of on the ongoing over look a is digits. $XX a time $XX with geared in years at has you operating in the that bringing regulators payback if way. more We're with infrastructure well though all closely new period that and an approximately it million approximately it's us it vendors the migration, be This

to to million personal loan. the $XX expand continue Second

XX are loan XX When we has to they is the Our the personal for them But use of later an actually and customers. our loan. customers population loan. People of a feature personal five important have years old this. years meet XX% when personal X%

is having given personal years are our us that will the personal we're business invest thinking year our is had to to in current virtue we balance sheet Having environment in by This us we one in private onto basically intelligence of a has a to because using personal volume the lens to originations are of We student loans year our a regard personal loans. into by accelerated market. time of by particularly year, and loan any three the of loan, next doing geared give and balance experience personal a audience. market year, serious sheet this we particular loan have particular have second it said using others loan

And this we money invest returns that time, year. at we have over good so look we will as will

year the typically the the to several to consumer thereafter. negative, cause losses when the for that all fourth you segment happens businesses year good profits and these usually the third acquisition the ledger credit credit the customer first the In is know the on cause have maturation built returns even, in negative, cost break you we side year year As any a and what second have getting of of years last by returns P&L. in you be in be we're

same So these level held of scrutiny ROE to other investments the our activities. being as

credit The third is $XX card million in business. the

be personal a are it's a card in business. have the origination that when an cards can infrastructure credit business leveraged. regards and We loan In business the a different we credit to not credit look service very at and customer so we

in cost work is so will capacity. partner with a not fixed should We industry. the there say it's it's the I that replicate really already that business over to in

investments We thirdly increase high a our as Steve. time originate will that been think Rocha this to just we rate, first very we day after I'll EPS with at the at work apply Sallie of a They our to year, with to gain that have made shareholders all same loans to here Mae. commitments Marketing, to well. moment way Sales three sad continue maintained continuing through to away attractive while long and alluded these a said this All good. are I cancer. XX%, a long share, the continue in dynamics and But market ROE. over battle passed that it's turn Having and to Yesterday of Head Charlie our a very

soon. passing, over led And participation, Steve. With floor -- for his and both before for grateful the so that was and away courageous quality that we're struck and admiration highly he taken his and too the turn friendship all stunned to from by life Charlie I'll high us with inspiration

Steven J. McGarry

everybody. good before it the we to fill I'm Thank you much Q&A. few details very quarter up going open in Ray, a around morning for more

statement. on the portfolio rate balance came increased net interest our Again increased the education The in the the will our offset a coupon start than by to margin in increased loans, as quarter level in quarter. X.XX% education more increase of than reduction unsecured think to on our year on reduction These basis NIM expense in or more portfolio positive more income and or points variable interest cost basis X.XX sheet X% our the change with tax versus offset private the X% we the percent So X after much point Ray NIM full which yield issued company. was at tightly. cash which loan to we which above education XXXX on big X.XX% it QX very manage private we to alluded that the favorable our a is XX another than of NIM more course continued in drivers The rates private some at remain loans LIBOR and at a nearly reserves in and is in by line the in preferred the net due item the funds. driven X.XX year-over-year compared debt we year strong prior X% that for can the details in for have margin. dividend it fourth of in

quarter of Looking of is Tax noise quarter a ago of the loss line. In we $XX income in line, a million quarter of of compared through with as $X buddies that particular revaluation at goes at year $XX receivables lot income the [ph]. with the recorded and prior million old other tax indemnified million there loss to the in the our in Act the Merion our attributable result quarter. this the A

in by other quarter have excluding no income in our had the By went tax totaled way lapse the unrelated So EPS. this we get a and position to offset But loss. we that million tax a one our questions line mark-to-market uncertain Act small the million the $XX would this tax these expense our items so of well which in had was reduction a noise were actually expense size impact Tax despite of through and they $X do as $XX been line quite an on panelists. of item few that both from million

fees Fourth ago. million and quarter $XX $XXX million quarter the $X.X increase. million a with So year out which were up operating with FDIC quarter consistent $XXX prior million is million from $XX compared in, our quarter pretty were a in activity. XX% expenses

is but this XX%. we FDIC year-over-year. build which in rapidly increases XX% volume Roughly of was personal driven repayment and half by continued see our million course was The still the XX% loan of of our just driven balance and which platform quarter increase were portfolio still growing, Ray it our grew discussed. big $XX or were operating expense expenses Excluding core up out volume by up

where only products the and marginal Our experience student industry. graduate and be our we efforts in important diversification to but core to to as business continued offering our an we shares we the private the market our school competitive of nature XXXX support are consumer gain be think brand not dominant in business despite particular which going new that to loan the enter and we player investments in continue

groundwork prior efforts. the X.X% at So X.X% our diversification as market our the to and our for very from share products both XX% of were was Ray it up additional loan fourth from with points on today investments course laying consistent we returns that quarter. quarter. in Couple down course in mentioned the delinquencies expectations The measure make of are we our future credit,

X.X% high We November are due up the and X.X% December year. and that the waived X.XX% X.XX% also very the very ago this entirely to seasoning saw the to see Delinquency repay up this X.XX% ago seasonable rates X.X% we quarter prior of in offs, quarter from quarter steady repay forbearances quarter. charge size billion. from every Net forbearance in and from pick And in the year that the due prior rate was down at they're to increase. $X.X the portfolio quarter year year and of in

from came another the prior offs loans percentage X.XX% X.XX% QX at and very measure a also P&I. there. in full and Again X.XX%. at consistent Looking and in quarter as There down of in charge are QX that's which down from

we P&I about Pending the at and total our expect is very matter loan up measure full story now to. loans as performing portfolio. X.X% steady no exactly of would it are XX% So credit it how we and

loans additional that with view $XX as the the $X.X in the loans losses repayment. Again favorably. at to versus billion year. at result in $XX loan Allowance fourth of Allowance X.X increase QX balance loans continues remains a was total in steady X% for the of we and losses. quarter. came ago prior XXXX very million in quarter of loans Provision very this performance of for in compared in education solid year private million ratio of and So, was repayment times our quarter grow X.X% annual coverage

balance XXXX personal ahead year portfolio think the allowance our of continues up I and P&I question Talk the by portfolio, personal the We as loans bit X.X% purchasing we it about over little is increase our loans we always Looking course XX%. of month. score targeting the mentioned comes end million as will are quality of a over any and loan the level headed? where $XXX grow. see to debt loans to as are the we loans, mortgages income the FICO and XXX balance by average QX sheet under can net $XXX the roughly of of are you on high sheet. These a At excluding million to had

give solid look you Difficult very and but young charge was So indicator, to delinquencies the measure on the offs are taking an stock. portfolio because on XXth. and June I'll of offs that loans as charge delinquencies very a at we

holding came steady charge cumulative rate was delinquency on offs X%. the at what portfolio in of in X.X%, were portfolio that at end that So QX

increase vast reserve the do our for loss there from thought we majority it So to We've thing night was it is eight loan on months performing prudent story what last loss the for in increase very to emergence do. well that and the portfolio, few expected to is questions pretty doing that in there. allowance XX straightforward, the we period a accounted got the so months a of increase exactly to

declines XXXX. is positive activity $XXX is what of then quarters in of increase Let's declining to loans we in so majority full saw very this happen Again consolidate. as from consolidation watch first in in to consistent The which began roughly What people that delta to and substantially and Again as is picked four occurs -- $XXX in observing a million incented is going talk expected are XXXX with prepayment the we when prepayment quarter. P&I That up we continue is quarter of that. the activity about a the forecast. after is rate little that's are third vast P&I bit that. is to million the the our

to I will guessing their will our that Looking if [indiscernible], $XXX probably current I portfolio about consolidate million guessing limb XXXX. on I'm it in a be not And path. interest sure XXXX am go I I forecasting that ahead of lower and out will rates -- am on number suggest continue am could that

watch we that carefully. So very will

common phased assets to remains [ph] Turning both graded requirements to is be to of possible the total with of equity considered significantly capital now in These a fully based of risk well XX% capitalized bank very one capital, capitalized at the exceed for ratios well end ratio a quarter. XX.X% the fourth the three XXXX. level after tier and and risk

In in is addition additional the an parent the numbers. of that's strength available capital source which excess reflected not and company these has to bank

While particularly days. common loan loan important of I briefly favorite amount story short think to on a requires CECL, let's build life which capital we can topic as in capital long more a capital. in of The project the CECL or ratios that tier include become allowance which us will you these finance talk one the risk to loss after as weighted equity allowance are measure of about circles we as implementation here reminder

significantly be to hold. III the ratios capital that So Basel above that to project phased in fully are we required ratio banks

core the very ROE in Tax from Ray good as Act. at there. XX.X% we came heading ROA mentioned of numbers XXXX, are outcome higher up, that and solid and So, benefit X.X% Wrapping course

So prepared that more are we take and questions completes now. our to happy remarks than

Operator

And from KBW. Instructions]. Sanjay with [Operator question comes your Sakhrani first

Sanjay Sakhrani

about maybe in Thank how you should asset we incremental much over guess the is you $XX expect and just realize several next you. you years specific classes? roughly I first on the got returns to Good products, on question those spending million the morning. there, loan expect could growth are talk the my maybe

Raymond J. Quinlan

are two the Sure, different.

cluster is in and while are loan growth a and loan is said I very relatively talking applications closer doing have and are the the offers balance capability now, limited low. we actually personal to sense. As piloting much what the We we're

be losses their be personal say with The the year I want ROE the entire path mid-teens they not business and well that is the second in that expect on ahead account expect will we of first back The and of ROE in be three is to to expect by you account year. cohort somewhat of how other as on the time. be in The weighted I portfolio want and point. We the large ROE returns mid effort to teens get that that will over over consistent basis a do time as as time going we as you average it upon growth additional with be positive to period to the be pay ourselves. is acquisition our though efforts year terminus expansion it's question loan will particular don't how this cost Suffice them consistent over determined or to of add dependent said other by the have vintages XXXX matters, question that high our because the to a thereabouts. on returns which is a

the we learning are and very Steve appropriately testing as into current lens $XXX personal books that. that loans accelerating pricing years. which we so have I actually been have as elasticity current be in not associated and won't would we market and have had already we cost million so we our forward by is the loans about had said the that for We naive quite we benefit be good exercise on the indicated and personal credit will And industry two by bound of with those as going

Sanjay Sakhrani

a rate your look Steve consolidation that a you ratio consolidation I the the you all activity. point and in for question in that color what is repayment year of Okay, at but this when still terms provided guess repayment then guys your about be the is returns competitors you of seems consolidation that equation the you have of tax seems on happening and a even right, it talked your just ratio can loans for talk because happening maybe it's increasing the what and at help thank that loans to guidance of could so are you you expectations how still does benefit also level suggests about thanks? pace, have diminishing quite your economic off there's that this now like but bit, a at competitors, little that for brisk for

Steven J. McGarry

XX% over level portfolio I that repay our off. going our from came going relative to big on we XXXX tip consolidations go consolidations. be obviously the from Sanjay, at the roughly terms XX% the wave going lot rate in and are to biggest and Yeah And just what's we do and repay repay of came point and wave. fourth of on have to of a future our where change our waves quarter P&I in ever of pretty are world think total sure wave of information principal in we've But through so but is the had it start so to interest

very market to thing right. to interest so the People consolidate is can play. loans an and this Now probably interest [indiscernible] going say far three fund them in well the interesting I you much going based wholesale and current undercut is it rate markets Consolidations said be I or quarters is ago be the wrong and on. and move know rates, is

have in increase So a rates. base market we seen continued

December. up of since I XX the XX points middle or basis think another they're

it competitors going I raised start their have who not to biting So is rates yet. think our

out. forward. where if traded What from our techies and so produce is I consolidate to markets, particular the is activity to would will publicly real that continue answer are see the that shareholders companies forth. We'll after and we and they seeing declining even is our the the people Now segment go portfolio it requirements fin have consolidate curtails with And publicly are are funding techies as from Fin and you of plays probably still pace matures a to they given return dozen very loans off charging on a very there's all impact the consolidation returns it as quickly. half portfolio what companies expect leveling I a and of traded that share the have and so its to

we current pace. they So should see even decline if impact continue overtime at the the

Sanjay Sakhrani

when final Okay, about the how it originations, first the on of and estimating, in market, much share in we the then gain? market think work that you is question X% guys growth are

Steven J. McGarry

It X% grow X%. is and X% up should pick Market evenly split. X% we share or market should to

Sanjay Sakhrani

Okay, alright, you very great. Thank much.

Raymond J. Quinlan

Sanjay. thanks Okay,

Operator

Your next Hecht with question Jefferies. John from is

John Hecht

away projects through of efficiency that of think reported of clarifications but $XX million Good questions and these million a that for year benefits will much look the of these of really investments products at just taking year, expenses the to my onetime in of as I morning you new the kind you are start replace in trying expenses reaping guess I XXXX? in out for there $XX following guys, asking year in technology, a $XX of incremental about following of following context other this and from in bit we project thanks little ratio just the this very will one kind the and go the this the questions, do million incremental Sanjay's year figure of this how

Raymond J. Quinlan

ratio. them over XX meet very the credit attractive instance lowering of do to cards lots did the diversification an have your have time. think you us we regard with we're ROEs card know that we here's we having signor we have often at them our our at with opportunity for that following year to been Usually Having customers look said XX% coincidentally them that that not our card. base they're By in and have they for John, said years that name growth business what advantage XX% thought a the for us question lives row or an time change. are household a high and of more million, as them efficiency while we certainly so XX% products for XX only cards that credit a We tax several at when of there's we've period and a the the here Sure in present age and maintaining many with was about that credit accelerate XX buy actually EPS and the still of during business taken we in change and because their a had third we that the in while of you've opportunity opportunity customer of. to and for do

that So we had allowed than the tax there's no doubt thought tax change to previously investments move about. the XXXX more return, into us

followed up two be legitimacy with when get not as are new around service three. other offer a the our following good nature in with the said QX the looked of think is an products other what investments infrastructure customer so we with. continue. to an started have and XXXX. investments took think every and which we customers is year investments ongoing with product of of The to to The cloud we upon point based ones in that from nature those offering and QX company the and the full right will opportunities qualify these And operating these good would stand platform to that in ROE at them additional ended or to inventory we Having is which we begin efficient

outside XX not at to line door a which didn’t cut interesting XX line answer question something and and your new we in we have of in XXXX. there's So in off the another for

customers. card as very loans middle, revenue associated the dollars XXXX allowed a revenue the us personal XXXX change. tax with a and So, diversification with accelerate virtue time credit small along with believe investments the in it while with accelerating benefit we end them be go of will think to this move beginning, the is to there We at year two In from the to regard by believe acquisition portfolios and and associated to that. would we it which type as keep will mature moving company with cost naturally cycle of and higher three the million there shareholders the accelerated other consistent was and same those of investment. this the it profitability record $XX on into We is

John Hecht

appreciate helpful, very That's the color.

you year the as can -- really date an the we about question, where should the this deposits in to second deposit dates been how funding and then the think deposit XX% you kind asset The XX% we in us on with me, stable see earning your excuse guys range, and consistent of to stretch has in give your update year?

Steven J. McGarry

is Sure, to look change. going not funding to approach our

grow to continue will continue a our to duration as access We will our means the extending of deposit and backed base we liability the asset of portfolio. market

sort as XX% an ABS funding model. it about deposit, of think XX% can You

do opportunities when opportunistic more themselves. be present will We

less which as deposit In deposit plus to LIBOR much terms funding like other of do we money seeing the what market products. to We're XX in our actually LIBOR some product. of at XX on very XX opposed we're data we our

We than turned handle along the terms it's In pencil to lines of it something of got out then XX% beta on expected. better and XX has an a I the be think we it. beta,

Raymond J. Quinlan

at to now we're started dropped XX. X, to and we Actually we down XX

Steven J. McGarry

very So with markets money known a etc. the deposit efficiently also is go It's the deposit access and very to to well. performing deposits able spending without of marketing, on lot we're market people retail as shop whole deposits Internet where

we see So we like there. what

John Hecht

answering for Thanks question guys. the

Operator

Your next FBR. Moss Steve from B. Riley question from is

Stephen Moss

for I potential your loans wondering some you expectations pricing give fixed just morning. could for was rate what thinking are around what color versus Good the year this rate you fixed are originations bullion and is? if

Steven J. McGarry

from was took peak of that consistent and call So pretty season it level. borrowers high up think teens ago rate a XX% what loans in we was saw a the that fixed I year our the

in to price our that in We're I at we cost XX price see XX of that believe time will the to a is no and maybe product the rate on based point today. We I this as probably what spreads point going significantly. fixed increase have terms looking loan in increase at funds here to spring. reason sit of basis

a priced trend average flattening LIBOR at to will variable a play that the people so ago year and spread as to product of they're X.X into month fixed products average I go X.XX% is one has and product rate you the our today. our out. today around rate we the that yield to is fixed obviously LIBOR watch well as continue compare sent yield They think X.X% on rate curve roughly similarly weren’t lot

Stephen Moss

are with originating to Okay, here of or what is and terms purchasing, four term than five? -- the regard personal in structure is then or a are that the it the years you it loans typically to longer three

Raymond J. Quinlan

three It the We is popular more of short years X.X years, products. it of the product XX% multiples is XX, year at lot is look average life year under than year five an kind five XX, about of three a product. a year XX% two so lived

Stephen Moss

with originations the my in and for include you Okay, billion loan to XXXX regard graduate originations? does that X question expect last

Raymond J. Quinlan

should on the and we loans you Yes, other. think legal, today graduate -- it think to products say that. and health tailored developed medical in I relatively MBA, some does. -- a graduate, give We've But along are a business expect the flavor loans do are just We we minor. six the with we for which couple pasting for with

has the that the X.X% government's we that look we market grant fees origination the of heavily by loan federal a associated current dominated play which with X.X% plus in so APR. as think at And these state is

financial price know that actually so audience. the amount most are schools graduate office not market schools And to identical can this of believe undergraduate total to said loan and as Having space. rate requires the uptake for a ones education that off space small on target that these in the graduate many, as the a reasonable way and is lower aid and many is we that cost a we you

We will and just be the in opening passing to know to season. what has And so in think exactly rate we don't great be this long-term our want maturation. conservative prospects we the take

got parent introduced word we in parent the said when loan, second I slowly mouth and around volume loan. with of associated the As the year relatively we doubled

expect high in slow products. growth rates of grad have We uptake compounded to similar for rate a an ongoing the

Stephen Moss

Okay, you very thank much.

Raymond J. Quinlan

thanks. Okay,

Operator

Cyganovich question Your is next Arren with Citi. from

Arren Cyganovich

I'm is how going forward? the of of spend the after question this know I still quite Thanks, the that of ongoing year, million recurring not going that but to is clear be much on this already XX XX asked million

Raymond J. Quinlan

right. this, of inside questions two are there Okay,

to the all way So one is answer the associated we XX investments repeatable number not it that $XX Arren million I the queue previous a was that five said. three million there the identical that separate a was three are after understood these grow asking XX no, that the each is efforts varies. one to of after million The it question will as a question A answer within with as about three of efforts at you're The after talking time. over is or areas least another is we're it, these well. of

to will For is year the first XXXX. which ten or not next and be year related IT being repeated infrastructure next

offset to personal in so on more The that in approximately the we the fact the base of loans may revenue well they by expect may the end purposes million. $XXX zero muted net portfolio but be practical XXXX spend activity other money contribution XXXX of will XXXX two with be a expense for we an have by will in increase all is but which

Arren Cyganovich

efforts approach about new in accelerating about student balancing business? about talking the about that's past the two people taking because the in and of you thinking we're measured more helpful, products to bit this And -- the those you a to Okay, a obviously thank investments very can now here, get expectation card diversification you. talk the in respect scared your products and loan personal loss by little credit off loan talked with

Raymond J. Quinlan

this thank for yes Arren, up. Okay, you picking

so it let's the put And IT two and aside. difference, take as said are I these

is for I to personal very talk you and are stated card loans know the credit and we as credit Personal in as earlier will the Now different cards, right. business, about right. us personal because we loan loan the

actuarial unsecured, loan, has turn specifics and a portfolio life of into this is with the loan. for a a and year business the in $XX personal non-student associated it billion. about loan are the it is the take we that different parameters we have personal We student them tune to seven six We to

as of risk with have of fits said that volume. the reasonable first well we program cost quarter have. Steve portfolio that it we we're makes that nicely that which Having adding of talking in XXXX as will for infrastructure initiated And experience mitigate you're extra for are the internally the as delivery this, we why some of credit the X/XX/XXXX that it years be So quite and about purchase also models it order easier in said our a any two about the personal models will this of the to as had we already both old cautious to in parallel lower loans work by is addressing. in he time us

experimentation. basis, a year it'll so And be XXXX will on of cost benefit a be

We cost we doing alright. more refine slowly, credit loss from acquisition a is marketing card following as we're expectation go Credit standpoint both as XXXX well a personal what a will into as in standpoint loans.

we working drop of as a days that pieces about the we are So the and XX personal loan I the partners. through couple is our of speak mail to start ability first not our as project Credit we relationships said doing talking with the quite within that. in where We're and are XXX,XXX general deliver we is process next the is through originating extend loans. business earlier of cards learning we personal about where that will are market

card We will in we an with will quarter to not our of the credit first offer XXXX. field build the first regard infrastructure and that in have probably

for go we in that as take will a against and we we the then portfolio build ROE that else we same then XXXX have experimentation forward. So everything guidelines year for do

Arren Cyganovich

guess on them that thing you limits the lot to loan can just a guess increasing if undergraduate prospect? year, about? that's always touch side, the discussion and surprising folks that's was that the might on progress was I the for of done very to of Thanks, act through of And maybe to just facts then thing on helpful. And get the the kind some prosper a dangerous talk I how lastly, it potential that

Steven J. McGarry

So act Arren the proposed just reauthorize Virginia for was Foxx clarity, for AGA, alright. prosper legislation to

has and add, lot So, continue today in the as a chance sits will prosper act I being Ray a that here give probable Senate that believe passed. of up so I as has then we being high not of of will picked to since the a and chance Congress I well do started chance

loans prosper and XX% Stafford market it like the would increase measured eliminates as Parent we do it, by in it what $X Grad, and However we undergraduate Plus. Grad to addressable but curtails billion. so graduate does Plus expand $X XX% see, we our to act billion It

a be it big inactive. would it positive be should So

Raymond J. Quinlan

thing occurs, when a take start any an what them likely that to to tax we don't the as regard that fool's the have of want are of happen with DC. goes on outcomes. were I Yeah, we this advantage to one to our act we And we numbers. anything obviously -- year opportunity think baked said sudden want a it let's in of would act what It this associated into in all add fourth to say and to of is occurred the forecasting quarter is in errand don't so having

talked that volume. We may we in XXXX referred our spent in have increase the XX% did of and to in Steve $X that projects So the you growth we're recall as such sitting as Nike the to is capacity spend leveragable platform that the a additional while million million, it's way that an of that we about we stronger XX% on anticipation act. that accommodate X can done benefit anticipates here a in having

what opportunities have see in So we and the some sense believe of expense the with and we'll covered happens that. we us front in

Arren Cyganovich

you. Thank

Operator

Your Suisse. from Moshe with next question is Orenbuch Credit

Moshe Orenbuch

just put use that savings. we tax the kind maybe looks savings million XX the perspective of has million XX that like about been after tax that should a third of over of invested? How it think to So longer term in

Raymond J. Quinlan

just two, one, a laid $X.XX everybody's number right. would taxes Well XX% thought you that come had of I previous as and part think simple this think If you in to woodwork XXXX EPS, I on of like the model about the the some you think what juncture for the then the do delta for call in just we you're and should at may been were algebra as on three here. tax course we

million of so and the Delta about implicates those between $XX XX. are is We XX invested that about it XXX. we pretax

is number correct. approximately your So

and Tax XX, forward over consistently these given the Act to include will and the parameters EPS within shareholders upon four years Going said have the delivered very that been I have three impressive. keep we we last take XX, which as will healthy last XX growth we same years promised as ourselves and

ROEs expect was the this, that are said to which years couple with you moderate still the ROEs Steve have so but know way as what on as all their We expect of passing far been be consistent that as Have our last to last XX%. EPS. of year

so to that it or We the improve higher growth go that to shareholders expanding we're we're doing expect our forward. continue than that we And our comfort while can that constant gain our at as revenue. ratio some operating in fact than efficiency base be to in better

is by As I number big is said course a XX% last year revenues grew XX%, by of expenses guiding grew but XX%. its XX% light.

Moshe Orenbuch

in in tax might tax it would based thought your local Great, years? for would is and any would come burdens change rate future eighteen it going that we state touch before. make your have that that of there things are a kind is than in Are other and this there year upon things out number guess that, XX% on I or that higher uncertainties expected are

Raymond J. Quinlan

of Steve why them. some. are you don’t there Yeah, couple a through walk

Steven J. McGarry

between we Well we XX% are settled and Moshe are X so X. and running

place then start XX% good So XX positively. seems and a absolute to like a

to an complete make Morgan JP tax talked and but That example for portfolio enviable a level just certainly tax housing ultimately for aspiration we journey. credit such are other will a want income down our quite will of bring in began our about of investments head is low take to rate We a rate. it that us while direction to efforts the fill tax XX% that to XX% and

Moshe Orenbuch

kind million is anything you reacting then to the that -- XXX you are question from do a don't where or at last is about how it that and your something level comment standpoint of Understood defensive something put from it that planning think to to and that a is asking do think in need is me about more you you level, place?

Steven J. McGarry

So for thank bringing up. that you

to our effective building talk through And consolidation we as put infrastructure, heads opportunities obviously efficient offer us a to get they and the about up a to to second We the in start altering call our borrowers in position are such our centers. and call quarter things. basically systems very do

and sweeten to rates we the On extends drawing a things quarter and approached healthy a circumstantial a the that front. depending on that and of in obviously that offer If right will to product on that interest the board same the defensive market. given Act lowering by will borrowing But bar was position in maintaining be as much to second we the bring the start more and that be upon well. with proactive able speak Tax in as to we're coupon the we going term now and the we've results bar are payment

Moshe Orenbuch

much. very thanks Great,

Raymond J. Quinlan

monitor search is to thing mention to we is, in one customer around allows our as couple service in to Steve provide we MIS the service but conversation has which here times a happened facility Yeah called in upgraded Moshe, only call that it. of been have got us alluded a I've said and of And side our that has that not center. every this call the

our in analytic standpoint anyone piece target to from interesting an change, a consolidation, us consolidation we're it's calls and mentions such responding the scalpel right for. don't loan of to put will customers who is midst the by which getting modeling NIM now called when different interest cleaver a so rate and at risk allow And individual entire at a in risk a a of meat with we way that portfolio

so And in process. a work that's

on second Steve counteroffer the associated it As with expect quarter as during as we the says a on to a well both sense. execute product targeting on

Steven J. McGarry

Moshe on final point. consolidation successful have we add, maintaining to the level was one versus balance just didn’t ROEs I And retaining. but of no obviously

Moshe Orenbuch

Clearly, guys. thanks

Raymond J. Quinlan

Thank you.

Operator

Mark from with [Operator question DeVries Instructions]. your Barclays. is next And

Mark DeVries

it of you've but $XX incremental if the guidance that in mid leverage efficiency XXXX talked your the fair longer-term, to driving of In you XX just the so NIM that of today statement targeting or in what's and of something is else? about out investment a there we take management that ahead appear you to if talk can and thanks. XX XXs million experience are back that you upside be kind is actually Hi, past have kind operating kind schedule, about expense of would an the

Raymond J. Quinlan

which and It the a are they sense continuing you will on the bereft to true naturally net Mark are million is them know is ability think it products XX's. Thanks true that consolidations the landing we in these introductory are paying additional customers XX for offer is at optional acquisition buy about present cost it a for as the products. XXXX. and however someone we It that sense defensive that investments has In from the moment, is would are as are in high question about forget path have one liquidate, another we because at also true be a with franchise that of portfolio that we for been else. though investment the value approximately risk that associated we we XX%

associated that and XX to and we increment in revenue therefore to younger of for balances on that we the XX's mitigate the And part in so maintenance with both the the with as them, well as portfolio the people we view especially loss of product any order franchise. as have million capitalize the position have two and

business XXXX And XX. not right that invest ratio this but in let's significant the would any a efficiency investment you're have in absolutely pure so in there ongoing business will be been amount

too but -- prefer to a much opportunity capable a think much any from sense much dollars much because don't We which compromises in acting risk. we in an the we're intelligent optimal be think a path of both in to trajectory bet us reactive interest that before that be invest to think in the the then shareholders from standpoint, and of able and a delivering may path put at one it's path this standpoint. we to the information the we So too mode is fact significant we way future would likely gathering leisurely an it day from warranted of defensive in force prudent standpoint, and we deliver

Mark DeVries

outside kind assumptions tend fact betas to in Steve, lower give then us can guidance some I also and and guidance your be of and than deposit assuming? of thanks that you Okay, hoping rate what was in of you've increases of your the tying NIM betas terms been

Steven J. McGarry

of terms into baked two in have curve we XXXX. much we pretty increases basically the rate So additional increases and dollar rate follow euro

market the Our as that outside opposed beta the of of cost deposits of north billion is of our LIBOR. expectations $X.X to retail on LIBOR our south money is of

there. some So there upside is

the steady. initiating in pieces deposit fall. again improvements remains The pretty we has pretty been where then Well market cost will broker we don't on the market spring some in And although steady. are it ABS see the moving as of is plan other and right funding now until early

it the component market. our is funding, retail there it comes So upside comes deposit from of the if from

Mark DeVries

thank it, got Okay, you.

Operator

Henry Your next question from is with Wedbush. Coffee

Henry Coffee

everyone morning to it month A call. and just for X shifts thanks just to a understand from emergence, the taking XX X good explain XX, that Yes, can the month to questions an my didn't I me? couple loss and of you

Raymond J. Quinlan

a much your loan quicker Sure loan introducing that product loan we lawsuits allowance for. start losses. -- shorter of for we maintain it's emerge lived year months typically personal in acquiring product. is loan you private loss are expected of do reserving so, In a our In our and loss a student component one reserves key them, losses as many how of

were opposed we So reserving XX. emergence an month initially loan so period X loss with to X for we months went as

we and accounting product prudent credit our XX change it sense. loads and the does opposed the the on months. whatsoever would set months through credit peak less if as that to extend that be we to anything policies the as expense losses get loss period It you it product, more on thought are basically front makes X once you earning As to that our not for outlook

Henry Coffee

a rates and And numbers here, other lot just at mean so loans Sallie million total sort particular some of student loan, value, you Mae consolidation are you your $XX to loans has not just that want then I and make people with how total about of it defense? a but could the theoretically defense, is or what maybe looking of of up if thank worth the they customer, you're as of business it have customer I'm going refinance defense, just it on customer you is a purely million thinking have and with size $X double that the

Raymond J. Quinlan

ways. both I is think opportunity there

increasing balances the and is one being current protecting the the so from those other balances of And away. again they stolen customer is

our disperse is note said way personal have say. And one only they the as business we as that we're of while now doing unique we're sort recall conversation much throughout in the product quite personal the so that's the unsecured this them college, loan and things. pretty to And we business loan

customers of at And relationship as is look they do defensive graduates change loan is balance And us reached is the the quarters the in loans it much originated think total cash how as purposes introducing dispersed being well our more of our as to consolidation most part, focus as several looking of two the way. it unfettered so flexibility we flow XXX% the of mentioned from both personal as about defensive on we're which for we terms from is personal the in is schools, diversification. which and the whether clearly Steve at give that areas cards for yes will next school offensive. we credit And

Henry Coffee

if final know do something to political they not Prosper I the compelling it don't but want you finally you Act then just it or is is do on something logical And form is Congress predict if the -- want? know there they'll -- is the year front to is this it

Steven J. McGarry

nothing at six see past reauthorization in [ph] that [ph] And urgent the and needs five road point been is down reauthorization this don't times AGA be in time. different. year and reason this any kicked the had I why the in could AGA there any

to So, roll. that continue can

Raymond J. Quinlan

government obvious portfolio is the at had to losses period XX% trillion federal have as disagree think well with to but the students' time as should underwriting well the it been of a which by gain them want can drumbeat Well associated Saturday will that but with the limits a rates act. it position federal think actually in that true momentum. tragic poor Plus it's cause its changes program But which that in in look It therefore with. some not or drive whether constant I make is it do do subsidizing both are in delinquency midnight many over people $X.X the that happen I involved to will Grad will performance and type the Plus to not and mentioned portfolio to be lives. over we time Parent act that that be on of gee, as original it will people have a as of

Henry Coffee

Great, thank you very much.

Steven J. McGarry

that. at given I through some If the center. of budget AGA fact there could in be in bill one actually more will to composition current a point time reconciliation reauthorization is in passed thing add a XXXX, the

Raymond J. Quinlan

a on standpoint. deficit so positive has from And it it's impact that the helpful

Operator

next Tarkan from Point. question Compass Michael is with Your

Michael Tarkan

running? year, to reason picture $XX originate start annual getting think remind once I so know Thank overall then you're up of your quick, any what you, just XX% big fully there box? And on I billion be to hits think Plus you the the market it a on just off can to late, slowly it private you is but graduate is I an couldn’t Grad just will going if credit loans percentage graduate and program is XX% us is know basis market per

Raymond J. Quinlan

No.

Michael Tarkan

the in then that XX% percentage of sort and of range? XX% to terms under in of writable Okay, sort of sort of loans

Raymond J. Quinlan

piece. have we so. be model that credit have think required looked of this to at the amount detail not but with a overall I looked We've Yeah, at would the

big XX% think have our backdrop be opportunity. we big opportunity. approval with do So Yes, think XX% a we it's rate appropriate. it The for do to your is think would question consistent a you is current we

Michael Tarkan

are Okay, end a I share, points but well thank seeing any picking and thanks about couple recent you? heating up school know as that in the more sustainable aggressive contraction is entrants of and up a then in competitively how more channel, mode and talked you you bit getting more

Raymond J. Quinlan

sure, Mike. Yes

and great looked such as As much Wells portfolio though discoveries. Discover. oligoplistically that as in and mode have share is as with for full providers it at ourselves you are structured distance would ourselves those their is had even we who and the distribution listing such of long Wells market hasn’t a as contraction suffered somewhat that it the know And and competitors a we the and have still

the of that inertia So or of the thing. much small as look and originations that's that measurable see said competitors that XX% last above more gaining ten we their by We anyone kind nature are would at detail Having of very market anything percentage. a and amount so of the business. don't be share done remains

now is industry And right relatively think the stable. so I

Michael Tarkan

Thank you.

Operator

Melissa Your from next question with is J.P. Wedel Morgan.

Melissa Wedel

be for or Again be $XX investments million the fairly pace year? front-end evenly of Melissa distributed expect Hi, in quick I loaded on Rick. do throughout to much that the will you XXXX, of this, the

Raymond J. Quinlan

it million quarters. it think XX that has three rough through I dynamics a balance different I would the is approximation We to think the say, and

Melissa Wedel

you. thank it, Got

Operator

And your next question Roth is Capital. with from Anne Masic [ph] Growth

Unidentified Analyst

continued rise can might in month at is conservative a Can for Hi, quantify to me Sallie LIBOR it went XXX chance which Mae good QX give you estimate you in pretty X% the for reached it might be a what earnings, mean your XXX from XXXX impact moment? earnings just a in market the morning. what and for one if

Raymond J. Quinlan

Steve. Sure,

Steven J. McGarry

will sensitivity I think interest rates. for our X% show basis a that increase earnings shock in we disclosures XXX -- roughly in point we our

So basically way material a not are the especially math increase calcs with happened.

Raymond J. Quinlan

bracket and we're if we that mentioned gradual. the instantaneous to had through this at point more XXX references heard of was him you expect level say as other continue the But Steve the so one we earlier which is are NIM Anne basis X% shock XXXX. and and at which that a end Steve the increases And bracketed

says So NIM X% short the I is gradual pieces the the that think comment brackets but question. piece Steve and positive as the answered that at in

Unidentified Analyst

this I'll I any Okay, perfect to asked and again common have you have instate plans whether not ask then or I a -- before it know is this dividend?

Raymond J. Quinlan

out our have this, believe that continue be years served foreseeable our at years. believe same appropriate that in the we to this we business into future we when we of and shareholders have the five You upon last see are the forecasted better done based have and which seven will all profits we we we can we keep and response to as looked think by what asking company the for reinvesting today the juncture at our

Unidentified Analyst

Okay perfect, so thanks much.

Operator

to over for turn remarks. there I this like questions are to time. at call closing no back further And Brian Cronin the would

Brian Cronin

to in precise Okay, thank Thanks questions very all all have much. helpful the areas. particular they you responses for and been teeing more

As work valued just we to a has end strong I segment. highly And remind so and obvious done franchise want to customer market with wonderful is position, business know thank well. the that this to a been attention for that everyone a their

maintaining this and four having Our doubled relationships the the purchases do of have with strong business asset sheet us good We control capabilities size having piece the that. years at are proven balance delivery while of benefits unanticipated for to continues personal just juncture which have one the good regulators. of in

balance period as to XX over growth far as billion that impressive very rate. concerned from our is billion Our controlled XX growth is compounded sheet a

profitability, We good margins, and returns. continue to have excellent

to to promising five four continue future. years on We we three building to over realize these last years our success we service, and customer improve the be expect five will that next a of to

thank for look will your available presentation the attention you Great, and questions to the replay today. of forward your on A salliemae.com. this Investor XXXX. of and you and thank for timing all be call So site

any have me free concludes contact further you questions directly. today's If call. feel This to

Operator

Thank call. you joining conference for today's

now disconnect. may You

SLM (SLM) 18 Jan 182017 Q4 Earnings call transcript