DOW JONES NEWSWIRES
SLM Corp.'s (SLM) first-quarter net loss narrowed amid fewer
charges, but the largest U.S. student lender, commonly known as
Sallie Mae, reported changes in the commercial-paper markets
affected student loans.
Student lenders have been struggling as defaults skyrocket
because of a weak job market and steadily rising tuition costs.
According to new numbers from the U.S. Department of Education,
default rates for federally guaranteed student loans are expected
to hit a two-decade high for the latest fiscal year.
Sallie Mae wrote off 3.4% of its private loans in 2008 that were
already considered troubled, and lenders have said they are hearing
more pleas for help.
"Ironically, positive action taken by the federal government to
stabilize the commercial paper markets is adversely impacting
student loans and student-loan backed securities," Chief Executive
Albert Lord said Wednesday.
Sallie Mae reported a net loss of $21.1 million, or 10 cents a
share, compared with a year-earlier loss of $103.8 million, or 28
cents a share.
The latest results included $203 million for private education
loan losses and charge-offs of $139 million of private education
loans during the quarter. The prior year's results included a $363
million unrealized mark-to-market loss on derivative contracts, $21
million in restructuring expenses and $82 million for acceleration
of premium amortization.
Core earnings, which exclude accounting treatment for
derivatives and securitizations, swung to a loss of 3 cents a share
from a 34-cent profit a year ago. Core earnings in the latest
quarter were reduced by 24 cents amid the ongoing dislocation in
the commercial paper market and a feature in the U.S. Department of
Education participation program.
Analysts polled by Thomson Reuters expected per-share earnings
of 12 cents.
Total interest income dropped 34% to $1.24 billion, while total
non-interest income more than tripled to $288.7 million.
Sallie Mae originated $6.6 billion in loans, up 10% from a year
ago. Private education loans dropped 40% to $1.5 billion, due to
tightening of underwriting standards and the elimination of
non-traditional private loan originations.
The company increased its loan-loss provision by 82% to $250.3
million.
Sallie Mae has been dealing with a budget proposal from the
Obama administration that would diminish the role of private
lenders in federal student loans. Salle Mae said it was working
with the administration to help put in place a federal student loan
infrastructure consistent with Obama's proposal to vastly expand
Pell grants.
Shares fell 6% to $4.32 in after-hours trading. The stock has
lost nearly three-quarters of its value from September.
-By John Kell, Dow Jones Newswires, 201-938-5285,
john.kell@dowjones.com