The SLM Corporation, mainly known as Sallie Mae (NYSE: SLM), announced Tuesday that it swung a third quarter profit of $116 million or 25 cents a share. That compares to a loss of $186 million or 40 cents a share in the same period a year earlier. The result blew-out analyst estimates of 4 cents a share profit.
The student loan company said results benefited from stabilization in the commercial paper market and increased student loan activity.
“The return of the CP-LIBOR relationship to more normal levels helped this quarter’s results; we expect credit quality to improve earnings in subsequent periods,” said Albert L. Lord, vice chairman & CEO. ”
Loan volume for the 2009-2010 academic lending season was strong for Sallie Mae as the company originated $6.9 billion in federal student loans, which marks a 25 percent increase from the third quarter a year ago.
Increased activity in federal student loans more than offset the decline in private education loans, which totaled just $893 million, compared to $2.1 billion last year. The decline was expected as federal loan limits were raised this year and underwriting terms were tightened up.
Sallie Mae did report loans in late stage delinquency fell to $1.3 billion, much lower than the $3.0 billion peak hit in early 2008. Net charge-offs were $443 million, while the company took a$413 million loan loss provision in the quarter.
Management said it expects charge-offs to decline in the coming quarters, but still remain at historically high levels.
Sallie Mae pointed out its continued improvement of its liquidity position, repurchasing $1.4 billion in unsecured debt, which resulted in a $74 million gain that added to the strong quarter,
The firm also reduced its “2008 ABCP Facility” outstanding to $9.4 billion from $12.5 billion by the end of the previous quarter,
The SLM Corporation serves roughly 10 million student and parent loan customers, managing more than $180 billion in education loans.
