NEW YORK, Oct 20 (Reuters) - Sallie Mae, the largest U.S. student loan provider, posted better-than-expected quarterly earnings, after tighter interest spreads in credit markets and higher loans, sending shares up almost 9 percent.
The company was hurt over the last year by disruptions in the credit markets, as its assets generate interest based on commercial paper rates, while its liabilities are linked to the London Interbank Offered Rate, or Libor.
'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,' Chief Executive Albert Lord said on Tuesday in a statement.
Sallie Mae, whose formal name is SLM Corp, posted a third-quarter net income of $116.5 million, or 25 cents per share, compared with a loss of $186 million, or 40 cents, a year earlier.
Sallie Mae said 'core' earnings rose 40 percent to $164 million, or 26 cents per diluted share. On that basis, analysts on average had expected a profit of 4 cents per share, according to Thomson Reuters I/B/E/S.
Sallie Mae said the results included a $74 million gain on debt repurchases, and a $55 million accounting adjustment to reflect slower loan prepayments.
Student loan origination increased 25 percent or $6.9 billion.
Sallie Mae said it set aside $413 million for loan losses in its private education portfolio, up from the second quarter's $362 million, while charge-offs rose to $443 million from $355 million in the previous quarter.
The company said loans in late-stage delinquency decreased, and estimated credit losses will decline in coming quarters, but will remain at historically high levels.
Shares of Sallie Mae rose 8.5 percent to $9.65 in after-hours trading.
(Reporting by Juan Lagorio) Keywords: SLM/ (e-mail juan.lagorio@thomsonreuters.com; Reuters Messaging: juan.lagorio.reuters.com@reuters.net; Tel +1 646 223 6124) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The company was hurt over the last year by disruptions in the credit markets, as its assets generate interest based on commercial paper rates, while its liabilities are linked to the London Interbank Offered Rate, or Libor.
'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,' Chief Executive Albert Lord said on Tuesday in a statement.
Sallie Mae, whose formal name is SLM Corp, posted a third-quarter net income of $116.5 million, or 25 cents per share, compared with a loss of $186 million, or 40 cents, a year earlier.
Sallie Mae said 'core' earnings rose 40 percent to $164 million, or 26 cents per diluted share. On that basis, analysts on average had expected a profit of 4 cents per share, according to Thomson Reuters I/B/E/S.
Sallie Mae said the results included a $74 million gain on debt repurchases, and a $55 million accounting adjustment to reflect slower loan prepayments.
Student loan origination increased 25 percent or $6.9 billion.
Sallie Mae said it set aside $413 million for loan losses in its private education portfolio, up from the second quarter's $362 million, while charge-offs rose to $443 million from $355 million in the previous quarter.
The company said loans in late-stage delinquency decreased, and estimated credit losses will decline in coming quarters, but will remain at historically high levels.
Shares of Sallie Mae rose 8.5 percent to $9.65 in after-hours trading.
(Reporting by Juan Lagorio) Keywords: SLM/ (e-mail juan.lagorio@thomsonreuters.com; Reuters Messaging: juan.lagorio.reuters.com@reuters.net; Tel +1 646 223 6124) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.