On Jun 26, 2014, we issued an updated research report on Sallie Mae (SLM). This Delaware based financial institution is poised to grow independently following the separation of SLM Corporation into two distinct publicly-traded entities on Apr 30, 2014.
Following the spin-off, Sallie Mae will be able to primarily focus on the growing consumer banking business offering private education loans, saving and insurance products for higher education. We believe the gradual economic recovery and declining unemployment rate should further enhance the prospects of the consumer banking business.
Sallie Mae’s operations are more dependent on students’ demand for educational loans, which is expected to be fairly strong in the foreseeable future. This expectation, combined with increasing tuition costs, should drive solid growth for Sallie Mae in the upcoming years.
Nevertheless, we remain cautious owing to several issues that the new entity is encountering. These include a competitive environment in the saturated banking space, absence of large scale benefits and the prevailing stringent regulatory landscape.
Analysts’ mixed stance on the stock was reflected in the movement of the Zacks Consensus Estimate over the past 30 days. For 2014, the Zacks Consensus Estimate fell nearly 2% to 50 cents per share while it remained stable at 63 cents per share for 2015.
Sallie Mae currently carries a Zacks Rank #3 (Hold).
Cash America International, Inc. (CSH), Westfield Financial Inc. (WFD) and Astoria Financial Corporation (AF) are among the better-ranked stocks in the finance sector. All these stocks sport a Zacks Rank #1 (Strong Buy).
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