Sallie Mae posts 4Q profit, reversing year-ago loss, but misses Wall St. estimate on charges

Sallie Mae posts 4Q profit, misses expectations

RESTON, Va. — The student lender best known as Sallie Mae reversed its year-ago loss and posted a fourth-quarter profit Wednesday, partly as a result of higher revenue from interest and fees.

The performance nevertheless missed Wall Street expectations, as the company recorded losses in relation to the sale of its mortgage purchased paper business, and booked some charges.

SLM Corp. said it earned $309 million, or 52 cents per share in the period. That compared to a loss of $216 million, or 52 cents per share, last year.

Core earnings, which exclude loans bundled as securities and derivatives, were $249 million, or 41 cents per share. On that basis, analysts polled by Thomson Reuters expected a profit of 44 cents per share.

The Reston, Va. lender’s fourth-quarter results a year ago included an unrealized loss of $439 million, before taxes, on some derivative contracts.

For the full year, Sallie Mae said core earning were $597 million, or 96 cents per share, compared to $526 million, or 89 cents per share in 2008. Analysts had forecast a profit of 97 cents per share for 2009.

Sallie Mae originated $4.5 billion in federal students loans in the fourth quarter, up 14 percent from last year. Private loan originations fell to $381 million, down from $851 million a year ago, reflecting the company’s tightened underwriting standards and the effect of increased federal student loan limits.

Sallie Mae has been targeting stronger borrowers, in part, by requiring higher credit scores and co-signer rates. The company this year introduced its Smart Option Loan, which requires students to make interest payments on loans while in still school. The idea is to get borrowers accustomed to making payments, and in turn lower delinquency and charge-off rates.

In January 2008, Sallie Mae also discontinued “nontraditional loans.” Those loans were directed at students attending schools with low graduation rates.

Interest income from loans in the latest quarter was $320 million, compared to $161 million in the year-ago period.

Core fee income, which includes the gain on debt repurchases, was $503 million, compared to $237 million in the year-ago quarter.

Results for the latest quarter included a $98 million loss from the sale of the company’s mortgage purchased paper business, a $34 million charge against its purchased consumer receivables, and a $33 million charge for early conversion of a portion of the company’s series C preferred stock into common stock.

Offsetting the losses was a $46 million gain from debt repurchases.

Shares of Sallie Mae fell 7 cents to $11.90 in after-hours trading, after gaining 44 cents, or nearly 4 percent, to $11.97 during the regular session.