Shares of Sallie Mae (SLM) gained 1.4% following the company’s announcement that it has completed its first asset-backed securitization as a standalone consumer banking business and entered into a deal for its first loan sale.
Sallie Mae started operating independently as a consumer-banking company focused on offering private education loans, saving and insurance products for higher education to students and families following the separation of SLM Corporation into two distinct publicly-traded entities on Apr 30, 2014. The loan management, servicing and asset recovery businesses of the pre-split company remained with the other public company – Navient Corporation (NAVI).
Sallie Mae’s off-balance sheet securitization included around $380 million of Smart Option Student Loans that were privately placed with a single, third-party investment manager.
In line with its new business model, Sallie Mae also inked an agreement to sell around $820 million of Smart Option Student Loans to Navient. The sale is expected to close this month. In its second-quarter 2014 earnings release, Sallie Mae mentioned that it expects private education loan sales of $1.2 billion for the later part of 2014.
Sallie Mae delivered a positive earnings surprise in its standalone financials for second-quarter 2014. Core earnings of 10 cents per share outpaced the Zacks Consensus Estimate by a penny. However, results compared unfavorably with 17 cents earned in the year-ago quarter. As of Jun 30, 2014, the private education loan portfolio stood at $7.4 billion, up 40% year over year. (Read more on second-quarter results: Sallie Mae (SLM) Beats Q2 Earnings Estimates on Higher NII )
Sallie Mae currently carries a Zacks Rank #3 (Hold). Some-better ranked stocks in the finance space include Cohen & Steers Inc. (CNS) and Provident Financial Holdings, Inc. (PROV). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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