NAVI - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Felicia and I'll be your conference operator today. At this time, I would like to welcome everyone to Navient Second Quarter 2019 Earnings Conference 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

I of conference you Investor time, Fisher, Mr. may turn President Vice Relations. would this to the Joe begin. At Mr. Fisher,

Joe Fisher

XXXX remarks, With Felicia. quarter Chris Remondi, for Lown, you, Good questions. After And open and to Thank their up CFO. prepared call morning. our CEO, earnings will today me Navient's call. our are we Jack welcome second the

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

call, can non-GAAP our to the conference found this Investors reconciliation measures of earnings, page refer results will at earnings. navient.com. first core XXXX is GAAP earnings a we GAAP be the call to our core disclosure. on full description This A supplemental posted in quarter and we measures During

Jack. And to the now, turn call I'll over you. Thank

Jack Remondi

Thanks, interest Joe. Navient. And Good joining you in for and morning, us today for everyone. your thank

and contributions results respectively. the from earnings exceptional. Our were saw the $X.X and the Results We repurchases core loans debt quarter leading $X.XX board, quarter refi to per strong of $X.XX. this of gains share across for include of sale

costs with In revenue operating interest combined strong, credit that and net were addition, income fee than and expenses and better plan. was

year are full-year are XX% this $X.XX established year. the or the to again for we exceed $X.XX half, we quarter at first meet raising and we the of between financial the on firmly guidance by to track Through the EPS beginning metrics and

attractive highlight cash achieve deliver to the of our This returns. and efficiency clients' and our meet needs, quarter's capital operating gains to flows, maximize risk-adjusted leverage earnings efforts and customers' our results effectiveness

strategies strategies. execute include in our continue unsecured stronger on from securitization interest Highlights debt. leveraging we capitalizing financing repurchase trusts the income over-collateralization net efficient to as and These to quarter include opportunities the unique

improved the credit both FFELP trends private significantly for future portfolios, and reducing Credit losses. our in loan provision

are delinquency that are near to in portfolios driven continued future at rates delivering in defaults. improvement data pointing lows, Our strategies historical or both

million this high quarter, a digital We driven refi our year-over-year, continues loans generate in data $XXX and originated at increase loans approach margins. attractive XX% to quality and

acquisition. quarterly margins technology highest the platform an date. delivers fact, our marketing In of and And to industry best digital cost

customers This to their is features achieve human-centered One monthly their of produced payment. proud their student of pick has that the things feature, design cost reduce allowing as with our along faster. others, and we're customers innovative debt the such allow interest goals of significantly financial to

of opens We or product This and of clearly $XX first consisting highlights net completed the million gain in pass-through financing quarter, for X.X% our $XXX a million generating created new refi business. a of origination financing by loans, the costs. origination capitalized channel refi this value the

revenue on segment, federal quarter, account placement. a asset million our large $XX this recovery in we In a capitalizing increase produced

competitor. performance Our our XX% better was this client than for

flow, million cash from allowing return financing through to us of to including billion $X $X.X $XXX share generated and we And quarter. this dividends billion repurchases shareholders activities,

this the result, we're top revenue in from very loan to million and growth we growing line goal the in-school processing significant launch million quarter to $XXX operating saw in $X business originations as on product year adjusted the quarter. In even expense fee loan The efficiency. new of and revenue, our refi operating originations addition decreased quarter our of versus ago improvements revenue, continued focused for

efforts by have analytics. satisfaction. customer interest increased These on year data driven efforts have success this on Our boosted been also focused automation, and

claims expense going against and million this legal submitting future our regulatory $XX includes will related those in reimbursement forward. In policies for quarter insurance be addition, we

Earlier launched achieving equity. in-school to high with return on loan product of this year, goal we mid teens our a

to process technology application and our are marketplace. of similar decisions, products reviews Our and have product platform design financing technology designed that and from simplify in positive. families help product other features the distinguish the make our Early students informed product been and

we The mid-July to tuition main time marketplace. the this and bills mailing optimistic for is catalyst will August product required which application brand continue of in Earnest our establish began into the on We're demand. the and recognize

value the the create loan business capital to maximize and and In continue flows January, skills timing investors. in for cash lending processing, key leverage to year return we our accelerate portfolios, of the from our infrastructure outlined objectives improve amount excess to our and – and efficiency, operating any

quarter's this like in delivering to successfully a thank forward quarter objectives. on the are half to actions success I'd and and for teammates As I these results of continuing my look indicate, the great we year. second

Chris? I'll in Thank turn and the of to you review deeper a today for quarter. now listening Chris over the for call

Christian Lown

for Jack. on interest in call And you, you your to everyone thank today's Thank Navient.

prepared which the be my for on in call review second section. During website, XXXX. can the found will presentation company's will I I remarks, Investors referencing earnings quarter the results be the

spreads XX% core Starting second loan $X.XX originations Key year-over-year the in increase the adjusted most slide quarter. year-ago EPS date. quarter from quarter highlights from the to attractive the was include at in on versus refi three, $X.XX a refinance

our of billion shareholders repurchase to nearly the in $X million optimization through dividends financing unsecured a of shares. of further the improvement reduction credit capital structure, capital of X.X $XXX of and return quality, debt million and Continued and

ago, for quarter. Let's line reporting basis last points, move charge-off beginning declined XX Navient's in charge-off points, have interest $XXX net second with loans the with the X guidance. was federal at the margin rates basis to on significantly Core four. and with segment The slide million rate from were delinquency education level the years. earnings a lowest in the Both our year XX

in asset inventory increase recovery increase increased year-over-year billion in revenue. from the volume year. stronger-than-expected Contingency nearly $XX a in prior XX% collections resulted by This

segment from $XX our year-over-year, turn consumer Now, slide million Core in five this million $XX XX% to earnings quarter. let's to and this increased segment. lending

During million of education originated the quarter, we attractive loans at spreads. $XXX refinance

while less slightly The total net private margin to of education a efficient the interest year-over-year, as XXX financing more portfolio increased points X% result basis than initiatives. declined

As a and half full these rate we forecasted a the the to education the favorable loan the raising mid year, environment initiatives second private interest our guidance are result of low XXXs interest for for to of year. net margin

delinquency the rate Credit performance continued XX% forbearance quality total strong the in the and declined XX% its segment declined year-over-year. as rate

slide Let's service We revenue to by achieved RCM guidance EBITDA healthcare driven and clients. to processing new review segment. business the million expand we by with adding of revenues cycle margins in full line and cost our management. in our continued continue Total $XX quarter were XX%, to disciplined six our services

highlights which activity. Let's our turn financing to seven slide

result to the a increased and $XXX profitability position, million. quarter first of activity by As second Navient share its stronger the quarter capital XX% from our repurchase in

share repurchase to our this X.XX the third accelerated year quarter to expect to the expect range We X.XX high-end activity targeted into times. of of and still the TNA continue at end

the estimated CECL continue with to approach third a we in and of this change call. As during XXXX, provide of our accounting to impact dialogues position be the of quarter's earnings in the range an agencies the expect we rating implementation

loans. transaction of financing fixed of and education first of generated demonstrated we This Navient's $XXX these In high-quality, term gain the executed for of the $X.X the entirely $XX billion in private pass-through a issued ABS transaction company. refinance rate a value of assets securities million new consisting quarter, and resulted million, backed structure of

pretax repurchase our sheet, by the $X XXX all of and our hedges. in transaction In profitability debt [ph] balance future unsecured billion. of gain improved million net This the outstanding This included bonds, in of outstanding priced, million quarter, of reduced complexity a we of nearly was also of attractively $XX yen-denominated reduced the resulted bonds. our $XX our terminated which retired

of XXXX Moving to remain year, to half on the the the focused at slide outlined targets. year. are the of these we we track targets first meet or beginning Through eight, exceed on the

in to $X.XX restructuring we earnings our As $X.XX and increase excluding exceptional year, This are performance range share from the of to XXXX of of first a a half XX% expense. original represents guidance. the regulatory a guidance our raising result guidance core per the

of second-quarter of income million $X.XX to share with income $XX in We turn compared slide let's or net net per the Finally, per share on $X.XX recorded GAAP nine. or results million $XXX XXXX. second GAAP of quarter

results marks to The the the differences related intangible GAAP and and are derivative positions and earnings accounting assets. core between our for goodwill

I'll now open call With that, questions. the to

Operator

[Operator Instructions].

of comes first Your KBW. Sanjay from Sakhrani question the of line

Steven Kwok

Steven filling Kwok Thanks my Sanjay. for in questions. Hi. It's taking actually for

guidance. the on first Just

You raised there quarter, was the to by a guidance $X.XX prior. to beat. And relative about this $X.XX about $X.XX

there coming consumer other was from. us the from where Is lending better now if we or NIM are rest all the consider? help you about should Just can think of upside factors the wondering it

Christian Lown

dramatically I'll over environment of Obviously, the things. rate changed the year. last highlight couple a has

benefits so, second there of the And that are half the realize into we'll year. going

projecting happen We we are rate in two cuts be continue beneficiary. a XXXX, to of to which

we So, net interest perform. to continue will believe, income,

think lot across-the-board saw our and you in was the strong businesses. really as continue I beat quarter, we to a have trends expectations And expect continue. to fee around an it of we those

Steven Kwok

sales are or – for look this opportunities And as of into around loan the rest just it. then, debt further there repurchases Got the year? we

Christian Lown

transaction important to few for next because achieve do structure the us into that for will be able actual to element it purpose the loan from you time, primary a process. sale the was One, time opportunity was it the to things. sale important loan a The an a time reduce the for in it perspective, is us results and do

so, for very if of so, today, of inevitably flows we a just we to very And that return but, form Obviously, the putting a was company. the perspective. plan But a financing pricing of to not well. Obviously, continue opportunities perspective. could relatively our forward. loan into also will as is plan, in achieve opportunities will attractive sale as where that is that opportunity. creating attractive from do us arose our that wanted cash an do of not the We us, future to but have be attractive sales today, obviously, market to going opportunity have acceleration business It and a take another opportunity for and saw loan business part as we first foremost we from to we expect returns, we lot

Jack Remondi

pretty We're of more unique was debt repurchase, but there up opportunity. And a about the show often. them, see to they very that don't on

Steven Kwok

Great. taking my Thanks for questions.

Operator

question line Cooperman Advisors. Lee of of comes Your Omega the next from

Leon Cooperman

question going to in same I'm the it repurchase. I've ask aggressive returning last you most been do Like, you our buying use to hi. years. through has been $XX.XX. retire capital quarter, the Yeah, shareholders for paid you you're I when five What asking you think shares? the of your Clearly, guess

year, six has or the probably average unresponsive. the Over five $XX.XX. that you buyback stock our the history What The going over justified than been buying stock under back to one more paid scenario. you of – relatively is it on last much me, is

is that us something business? back the Can undervalued relative value buying kind thinking your to with the You're you're of what share expectations what of about you are.

Jack Remondi

your for Lee. question, Thanks Sure.

that an Year-to-date, million investors. shares. for has We continue it's average The share repurchased price to somewhere that we believe months, the little XX have returning through attractive In $XX.X transaction during timeframe. been XX is almost a our share a last around $XX.XX. capital repurchases over

think that can value legacy loan we're look our the consistent deliver originations share additions think of the second view. we our the in business back attractive the value when So, shares quarter and we at company. in repurchases discount we more from intrinsic last to can at add prices months approach. from of buying Obviously, prior value portfolio, been we the that substantial in reflecting processing to the point a the the And than that years purchase been areas, with have in we accelerated that's the the we XX

Leon Cooperman

do The what it you intend available And left, would to use $XXX about million of say? in capital what this kind year? had that if to you XXXX, you preliminary you guesstimate make a have have you'd

Jack Remondi

combination board repurchase next that on this year. a And the discussion the plan is amount the with our a that process completing do be and forecasts of happening year we we ultimately, authority remaining will repurchases later So, this year.

Leon Cooperman

But assume order of to I be least magnitude at XX%?

Jack Remondi

– it's I process. don't get ahead of board want a just to

flows can at the what look and the generation. You cash capital are

year activity. kind material changes to wouldn't that see in You of year

Leon Cooperman

flow clearly, And, cash than preference point? excess a into the this put would making at rather repurchase your dividend to be

Jack Remondi

Yes.

Leon Cooperman

Okay, thank you.

Jack Remondi

participation. You're welcome. Thanks. for Thanks your

Operator

line the from comes question Jefferies. next Your of John Hecht of

John Hecht

very Thanks Morning. much.

just from The quarter, wondering agreement. the what I on a the was – from expenses first proxy service I'm transition the the $X resolution, question, million you $X know just also – but is million there the had that.

Christian Lown

remember, transaction offsetting So, have the and did other. agreement, revenue first we outsourcing where is the you each expenses that may data we

our a our it's So, line. we really taking are over. part impact just but wash, that it really It of the from as bottom transition they zero is on away platform services agreement has

John Hecht

Yep. now. of what's that kind wonder, going Yep. lot hedging I lower have margin, – I know give present but might forward I of you done the going kind And the a given what you? for curve your can environment you – rate remember and of guys to in then, a change opportunities sense for forward

Christian Lown

to the on first, the point, rate impacted So, hedges. the really hedging environment isn't

Just threes ones, risk. really our remember, hedging we're

flows. There But it There And provided so, it and what is times certainty our does really provide cash we've are times certainty. really just neutralize done that underperforms. it risk outperforms. are to

do – out, be in declining So, rate portfolio is to what the at. rising really lock needs the try what to we months really XX hedged or environment

but an is of can in decline we're up value there, where less environment. the pick in rate we rate a clearly today impact So, environment some which

we're things. few fairly it obviously, also note are a little we're asset important while liability important those currently. income. match perspective. more pick that there. short-term well to there There's rate decline One, and And interest a move we margin as to an net declining experiencing then for our some It's becomes up from In and rates stable benefits a that or those funded income, enter benefits environment, rates as

through. So, see environment flow if the should continues, rate we that

interest net also income and for could So, we as well on see expected. we in cuts fourth quarter, improvements rate benefits the as income the if see, third and

John Hecht

Thanks very Great. much.

Operator

The Rick J.P. line of the question next Morgan. from comes Shane of

Richard Shane

a have into forward of $X.X every advance. done sort wall of job in sort good down XXXX, or move where when guys. $X.X my knocking have billion. Hey, address rates couple at of maturities this those have we you've steady start Thanks of questions billion. coming taking and Look, maturities as today, the curious, guys I'm for years? maturities there's those to I'm those to assuming, the you impact of or rates opportunity steady line morning. maturities a benefit you margin sort lower you year next you're look a how going them of of XXXX, or from half addressing XXXX over maturities. year, of are second you if the

Jack Remondi

take $X at represents cash. balance a have look our over So, today the Obviously, liquidity the of great maturity question. it's XXXX we sheet, on last over billion. I billion When a $X.X

We have unencumbered assets in meaningful scale.

we're our So, our to market we forward. continued to rates the Also, ability at opportunities versus where for focused unsecured XXXX [indiscernible] potentially. really of assets feel address What doing sheet, very looking going attractive is optimization good finance be. so about on the may and balance

analyze we're of opportunities are outcome second our and we optimize them the are the we the that the will So, year. half clearly the to continuing there and focus exercise position on is review on. for But and and in shareholders, engaging

Richard Shane

given about options down of shares, and sit enjoying a at of buying guys place maturities, of acquisition. curious look – opportunities, the the you profitability earnings, some Okay, you, great. to the when you're strength and do today deploy redeploying team, I into back have capital? as a the that you profitability organic variety see that where think management best am And, meeting look,

Jack Remondi

a growing that organically. do the in So, have business things mentioned, business look actually you think multiple includes we we when outlook combination here, That to the the at we of simultaneously. things ability

we see in-school the business the of leverage business. You the skills less side launch capital the still increase originations, But, to opportunity area processing loan the nonetheless, in to of of see operating the our really demand an grow a infrastructure refi product, company that and equation of XX% our that in has there.

meet mentioned, flow our have and to liabilities maturities significant resources Chris we cash cash As hand and on our there.

returning shareholders. effectively. saw And we things, see those it the the very position cash unsecured are reduced return to reduction to – of unsecured we've table. to this growth, while All capital three those $X our year organic by date, manage on adding billion ability and reduction and You capital debt of through kind balance debt our to debt excess

Look, things. would we capital for of if to the elsewhere, able obviously best love we And our had high, end be what do shareholders at generation get in capital that's our is can at than they the and because to is three able of it so investors – redeploy all actually higher can returns to use that the day, do. we case, we're our

Richard Shane

Great. Thank you, guys.

Operator

Credit And from Moshe line question comes Suisse. of your next Orenbuch of the

Moshe Orenbuch

there, than wondering TNA thanks. talk the guess Great, ratio your could the drive able congratulations bit excess? Rick's XXXX, to dovetailing what value? steps was perhaps you about, going in a just look into better one, factors Kind use expectations. out that little being through major number to I you improve how there how were I as if get you on question, of you're actually to are to

Christian Lown

ratio great couple question. one, A obviously, things. of was the year guidance TNA gave of it. a end first guidance. we Appreciate That's

So, up that of to at X.XX times. end end are clearly we to above times. We X.XX in do higher the expect X.XX that

up in at we quarter bit to my little this activity, third try we But, and the us the Some from we you was capital from by that. the driven mentioned pace same a in of benefits accelerated we quarter. saw loan debt as a remarks, the the a for strong perspective. on what will clearly, we very And realized And repurchase that buyback continue position second inevitably, quarter that to do as the sale. is, in our in early catch once saw I share saw

we number the dollar shoot That's for. should similar. So, be what will relatively

finalizing capital impact good implementation and you're position We put thing, last through manage of CECL all today. aware, the that. views coming. how and to about able to year be our big in as is that. successfully to our this position we the We're capital ourselves over through We've the the Inevitably, feel manage

where will at impact we And clearly did third better giving be today that clearly, end you be see the we're and guidance capital you were expecting. capital. through to the share little manage accelerated and some we quarter so, and feel pretty to the repurchase activity are to of position we we managing than because, we But a able good our update clear help how we

Moshe Orenbuch

kind And just have Chris. Thanks, I'm a it. perspective it. wondering kind but Maybe to allows thoughts of to thought perhaps, you of Got picture how thinking in to that a also that relative a going from your with there's big use longer-term servicing But peers just strong the obviously contract is success there way to Ed topic, manage that had on you look could longer-term. fact second of given if about Department leverage it how is any still that [indiscernible] as you the expenses? any

Jack Remondi

execute come a One is of variety us loan of expertise, of in to company our servicing. in larger particularly this The skills the ways. operational that benefits how we

data-driven at specific to us analytical how we allows be very very are customers. We in that our process and assist individual

results that how How skill they utilize You performance that That's how default all across of other see or the around. Department have don't is set gets we will schools, execute rates. be think executed. of are measure which entire to valuable and different measures deliver dependent and Ed. form and a better than federal schools it consistently gets services issued a platform. across we individual at look it loan cohort could you is federal really a that the our rate, RFP on in the These that portfolio. default delinquency all We the XX-plus-percent The uniform

we changed have to related center to in those years. back the couple over service. expertise So, our and the a hope and able last of There's that responding of a bit commodity-type that around the now generate for a versus quite process RFP the just and are we office we're things value functions to that be demonstrate call

and to that last something The regulatory a and and profitable. the make attractive that that that to be needs that contract addressed is is business would kind add of environment it's with that piece just to business I challenge associated

Joe Fisher

Moshe, still are there? you

Moshe Orenbuch

the your think to I had report hanging respect there. a am. I you on Anything to kind kind regulator – to little bit discussions of left Jack, about with of end at that? the that with

Jack Remondi

that we equation, So, on the been the there've work made a of been that about have regulatory side of accusations the do. number unsubstantiated

of the fact their look two customer more thousands claim We've years unnecessarily claim. filed borrowers to the find through of yet to ago now forbearance. years been lawsuit you discovery were CFPB If has we at than they that single hundreds and CFPB was a when two their into of support steering

in stand. pattern volumes I the where and we about the think speaks regulatory situation that environment fact

Moshe Orenbuch

Thanks.

Operator

[Operator Cyganovich from Arren Instructions]. And line your next Citigroup. the question comes of of

Arren Cyganovich

how rate the an lower should [indiscernible]? or Thanks. financing originations I more refi opportunity challenging Does was just forward? make going from environment impact wondering create it that your the

Jack Remondi

rate the service credit the at loans, customers and lower sufficient helps save coupon easily to loans – their debt money student established to down refi accounts product higher So, flow pay have an that lower rate, faster. to a those able who be record refinance cash those business is a and

absolute product that environment it's differences on reduces but the the a that rate available for interest between environment the really them. marginally their falling a for versus loan current to coupons debt original demand rates the So, market overall. Whereas marginally improves rising are product, demand rate student

Arren Cyganovich

Okay. of academic was. be from current I rates the plus will the guess where year originations XX-year this new because at lower

imagine… would I So,

Jack Remondi

grad new paying at they environment, to borrower is still although rates. on rate a lower, interest are today's situation. on refinance rate lower a loans grad what loan, be In than would They're their obviously plus credit plus depending able we those the

Arren Cyganovich

quite know than I anything piece, expectations that that, able you'll early for on but were? it's your more there what or be that original And indicate Okay. would less do is days in-school the to

Jack Remondi

and August. the accelerates bills in – begin to last families tuition of then the weeks process and loans kind for sending their them of of Students received. schools into The once in start that just volume apply couple are mid early

The – game, expect just we're that. in we kind see flows to stage the but see increases what early very are increases with kind is to of associated in the it process. would percentage starting the of application this still So, at

Arren Cyganovich

Okay. asset while been recently. be to the the to just and that Is generate continue quite something continue segment stronger recovery the to collection federal lastly, a with tail And on expect for strong the collection have that rates? then, those you ability to

Jack Remondi

So, came or one-time more the executing a that so. last we've or that opportunity from large less placement over year been

You of large. can see placements accounts in I there inventory the that that quite who space said, got executed continues to And two transaction. We've us in well. were as of large be extremely that

have does competitor placement. that it an large a not continued that, certainly It life. ongoing gains single was We space. in revenue outperformed our a from finite but see one-time by We'll have XX% placement,

Arren Cyganovich

Okay, you. thank

Operator

Your of Bank the next Hammond America. from Mark comes of question of line

Mark Hammond

Thanks. Joe. Chris good Jack, And and morning,

been relatively declined? first pricing The Have you up has to question held refi than in able rate product, environment was declining Earnest environment? general keep a has higher pricing on rate the how the

Jack Remondi

As in prepared volume remarks, the we said last at the quarter's margins. origination was highest this

that quarter's date. is, of we absolute generated portfolio net the what second of not at our it what's the And to in the to we had originations quarter of the the So, funding relative any look just rate in costs. terms rate but margins highest loans

are of but ourselves the Now, our and that – got that – the steadily competition continue competitors business. marketplaces refi has see we since march kind pricing people origination the interest is to into high, and the in environment. rate general And improving product to relative been expect we

budget, advantages to save process allows their them our select our designed and that come and funds more the featured is product their from monthly them way to to achieve manage think We faster. customers. the and in allows goals It payment time space fit which over for financial

advantage cost also us. Our significant of is for acquisition

the average. We of originating leads to a deploy we a of our estimate, mail process. technology direct cost are through we're process the that our digital as underwrite And acquiring about rather shop, – the in a digital this half result loan a than a meaning industry that and loans, principally is, generating

together, So, when set. got you we features combine we've very product those attractive a think

we X.X% costs, can in of Obviously, from value the portfolio, pass-through net that the a the refi of transaction the you quality of credit saw we gain origination shows that it capitalized this business. did, generating generate given

Mark Hammond

Thanks, credit few about goal months a you outlook ratings, had noticed months guys your have moved anything to credit taken ago, to any couple mitigate switching to if And Jack. negative maintain I negative. And or outlook. off current then, Fitch getting then, that conversations a over ratings. past Wondering to done your of is the have

Christian Lown

a of and our that been our Earnest had position to an evidence, All focused mentioned, better has achieve say should concerns, give them day on goes from continue continue a concerns. about those we and aspect, Jack expectations, – regulatory think as They when business of you and with execute I has sort we've get clearly, is and, liquidity the their – can maturities if plan by, comfortable I on to the as our been issue plan more look taking their that in they execution concern they the primary been although of care any a little remains of And build. comfort. have than lot perspective, every it unknown. And lack without

So, do and want But ratings, And to well. said, all see maintain we'll we addressing up. seem and ends as their do Fitch our execute issues. to be so do I we we is you execute think where

what to is. goal their so, see we'll have And just ultimate now

Jack Remondi

add just I that. to would

issues managed liquidity some debt single very we aspect on structure we the and period. we Great have the of delivered in of forecast and outperformed way consistently day end challenging every here the the is environments of the in liability through rating Recession, our recession, to after our capital presented some the associated that, that have have the We every financing And have rating agencies.

Christian Lown

show that. And our ratios

would admit meet people most whenever reflect not do we is. continue points on where with we structure that them. think and our those push our are I rating to ratios our And capital where

Mark Hammond

Chris Got it. Joe. Jack, Thanks, and

Operator

Henry of of line And your Wedbush. from the next Coffey question comes

Henry Coffey

Yeah. Good it's share in But your morning, count? you can quarter give end-of-period Great me everyone. if there.

Christian Lown

XXX. We CFCs had of ending

Henry Coffey

Okay. And then, July. it's

good metrics. six of months had You've credit

insight You What different probably look your over really are the have where fairly student is thoughts next what you into your deep that. When on months? your XX two a you today's fronts? into specifics at X have are behind the thoughts credit borrower and what metrics portfolio, about to insights do FFELP

Jack Remondi

Sure.

So, credit we here. three really in that look different there's metrics at

are of performing – rates, portfolio are You your When legacy your at extremely or near historical call help the delinquency default. the It's need we loans. private and lows. who That's well your segments and and, refi originated of the strong the have do work as said payment a and avoid look to reflection FFELP, plan economy. we reflection our legacy right all of find newly assistance those I a earlier, in ultimately, at of three customers

storyline loan payments that significant the students are student making having loans. or In on student space, difficulty generally their meeting is the

them customers the Our and experiencing but with managing mean kind who we opposite. and are of not you degree try a majority and to statistics take see difficulties. delinquency you there are, statistics are who would There tell and of work who that And customers successfully with are the in doesn't solutions delinquency their find here. overwhelming them. students it on graduate payments, But the are debt

Henry Coffey

observation? your apply that it make you in entire about portfolio, the When to direct slice and would obviously, see business the what take same you, you know you everything of

Jack Remondi

Yes.

Henry Coffey

will how finally tell And your us be or to capital on XXXX thoughts some us into give earnings – CECL, you for us our tell you we are able obviously, then, into but expectations, about CECL estimates there? should factor insight what will

Christian Lown

et CECL give quarter XXXX. implications, capital, you roadmap for in think cetera third I the complete we'll a

Henry Coffey

Great. very much. Thank you

Operator

Your DeVries Barclays. line question the of comes of from next Mark

Mark DeVries

of if sounds back so, It those about see other if the student of upside cuts NIM? biggest can is the private you of three mean any improved driver LIBOR two the cut you give NIM XX private both on from kind kind rate floor also of NIM realize thanks. to of the a of prime think mismatch that Yeah, And of us other and private instead help what the funding income. cuts basis we kind helping on sense in side get the and/or you points you might the us rate the might year? kind half efficiencies expected of Can like guidance loan to earnings and Fed presumably two if

Jack Remondi

this So, from the to the for tried this the contribution. momentum forecast levels earnings really year for coming think as the highlight of of second an are and across-the-board results I morning, we've the first of company half the and

line, better top margins. stronger we're in the space, the originations refi In seeing loan

rate interest income And Our on is the legacy point in both as fee of helping is LIBOR revenue you floor terms out, our the us related and portfolio, environment better. prime issues.

our also and We delinquencies from both portfolios private credit. provisions. that's improving saw declines in We're FFELP significant to double-digit benefiting leading lower

gains we the of the with to run combine expense the the operating that continue company. what's operate and When of side the the on share in equation, count, earnings deliver And we momentum that lower efficiency how driving you business. is

across from a coming single it's that just note to area. contributions just important versus it's the board think I So,

you mean? add maybe, basis would a want more XX a bit then, little about And point Chris, what cut to

Christian Lown

Yeah.

costs. timing. it on more to financing be, for happens and the important. LIBOR obviously, cuts, as depends of the Fed to are Dates what expects really meetings Where So, market

So, it's straightforward. not as

forecast, As October. one rate I've cuts have July do mentioned, two for one in we our for and

but on think the when happened, Another rate depends it would timing it would of clearly expectation it market cut when happen. be would beneficial,

a will just it third if expectations was So, say, all probably I would can coming, And given be for at difficult clearly quantify to it year-end. our It's beneficial. be two.

a it's more perspective. So, little that from just opaque

Mark DeVries

as extracting Okay. much quarters? be in to the should for you you opportunity funding how there far efficiencies, we is And active additional coming more and expect how as

Jack Remondi

there against obviously, the that realize our our of assess continually to the and weight of we expect think other. years of we a lot the financing, is opportunity. And, each coming costs that cash over I flow expectations the term financing, them

billion other have We $X still There of are opportunities. over-collateralization.

We unencumbered have assets sheet. the on balance

I opportunities. our the continue is those you markets push are I tell on can healthy. financing very think perspective So, we to

continue We inquiry reverse into get those to opportunities.

to well, optimal highlight structure The obviously important and weigh make we as to And is only those those expect all capital and weigh factors. thing XX-year us you so so, should continue decisions. benefits is I'd

Mark DeVries

it, you. Got thank

Operator

line Pascavis from with question PIMCO. of comes Travis Your next the

Travis Pascavis

Hello, everyone. my for Thanks taking call.

about? this noticed little – Just be? legacy might reflection you more of I of else Could loan that there quarter. refinancing could I kind kind the and seems think on of Is bit something see if comment have going amortized wanted book you to private just on why a people comment to that it the economy or them should is

Christian Lown

from perspective, relatively were was expectation in expecting. we what From line actually our and our model's

again, versus sure were. outsize we seen your haven't I'm expectations so, not plan. our And amortization But what

probably In fact, balances better little thought were say, would we up. ending would've we I on where than are actually a year-to-date,

line So, just to even better unsure in was, expectation again, your slightly than are I'm relatively but what ours expected.

Travis Pascavis

new book Is how timing – you loan that given think something… would the do private least the stabilize? about of at of on kind the loan the when the loan generation, Just side,

Christian Lown

a It's great question.

it's seen we we've X% remarks, be basis, better we them. there. my best opportunity on come really perspective, return originations in risk-adjusted decline. against a capital mentioned refi loans. I expectations we in. spreads to And continue to at seen. like of have put Obviously, continue That's year-over-year We, against the our lot From a see As those obviously, a the than

that forecast would portfolio say position, closer we thus so, And seeing would private we a we're getting but we're don't when we grow. to like what and far. of that – stabilize are I But have clearly the

Travis Pascavis

in out that But is is or anything the you if traction A call has proposals of it there general? side think a out. potential a of – you lot candidates is Great. important out think by of lot out on to could interesting headlines. noise, of are is that stands There's coming your that or lot kind new maybe maybe anything you particularly highlight that

Jack Remondi

And noted, and are this At the to decision. in for government there college in the families at students as game, stage proposals decide you assist paying think student cycle. I taxpayers debt, are they the political given how a proposals this of lot election and point. surrounding is really a

have see we'll all unfolds. wait how So, and to that

Travis Pascavis

my maybe And understand. just final Totally question.

the the that could Department update in of could maybe been you timeline you with? contract, Just for what stops and particular us Education's is conclusion of there's or servicing Maybe starts. of anything lot – refresh,

Jack Remondi

how contract that Their the out So, been concluded are been state current have are contracts out – single part of to been to protests protest would've are by somebody have that decisions the for kind form issued yet. exactly others going action It's components decisions continue is as expectations RFPs. components have is in and by to made still certainly say seems this every response And made accompanied really industry has segmented bid the and various been to that not that for be because the we different bid awarded. to expect by protest RFP. that go been difficult even bid some process of into now, but would in

Christian Lown

was current get what extended our which to was so that implement, choose six-month happens did. to we when we'll And December, contract and [indiscernible] to they see if but wanted December, through an extension they

through unclear. be Jack's comment, continue But it's been to we per And could December. extended, that but have again, extended so,

Travis Pascavis

Great. update. Well said. Thanks for the

Jack Remondi

Welcome.

Operator

Mr. over further questions turn back Fisher. to And And time. I'll at this the there are Joe no call

Joe Fisher

everyone on or I'd concludes questions. you, like Rutledge, Please if you joining me today's have today's call. Nathan follow-up us for colleague, contact Felicia. thank call. This my any to other Thank

Operator

for And participating. thank you

may this disconnect at You now time.

Navient (NAVI) 24 Jul 192019 Q2 Earnings call transcript