Sallie Mae: 2Q EPS miss on higher provision; full-year guides ex. NCOs reaffirmed

Research evidence excerpt

Sallie Mae: 2Q EPS miss on higher provision; full-year guides ex. NCOs reaffirmed

Tidbits from the earnings call

PLUS reform / growth opportunity

• Reiterated the Federal PLUS reform opportunity as a $4.5–5B increase in annual

originations for SLM over the next several years.

• Maintains preferred-lender status at 2,100+ schools; delivered all planned peak-

season product enhancements (medical, dental, law, MBA) plus the June parent loan

launch.

• Early peak-season application volumes tracking at the high end of expectations or

better; management reaffirmed confidence in FY origination estimates.

Credit / debt-resolution dynamic

• The affected segment involves borrowers with willingness and capacity to repay

who are moving straight through delinquency to default, many engaging third-party

debt-resolution providers marketed as consolidation/refi solutions.

• SLM is taking control of post-default recoveries in-house; frames the ~$25M as a

timing-of-recovery issue, not credit deterioration, and expects internal efforts to

equal or exceed that recovery level over time.

Loan sales / funding partnerships

• KKR partnership tracking to plan with volumes in line; second partner's structure

largely in line with KKR economics with minor tweaks.

• Both KKR and the prospective partner have expressed interest in taking graduate

product, a next phase after peak season; potential for modest credit-box expansion

at the margin.

• More detail on fee components/ranges to come once the second partnership is

finalized.

• ~2% is the right flow gain-on-sale benchmark; 2Q looked elevated because the

upfront price captures both the initial and second disbursement (accounting front-

loads the gain on newly originated loans).

NIM / margin