SLM Posts Q2 Earnings Miss
Key Points
- Earnings per share of $0.32 fell short of the analyst estimate by $0.17 (GAAP), a 34.6 % miss.
- Revenue of $376.8 million missed expectations.
- Credit provisions (GAAP) rose sharply, and credit quality metrics showed some deterioration, offset by continued growth in private education loans and a higher quarterly dividend.
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SLM (NASDAQ:SLM), the major provider of private education loans known as Sallie Mae, released its results on July 24, 2025. The most notable news was a significant shortfall in both GAAP earnings and revenue compared to analyst expectations. Actual earnings per share were $0.32, well below the $0.49 GAAP estimate, while revenue (GAAP) reached $376.8 million, trailing the $399.5 million GAAP forecast. GAAP net income and profitability declined steeply. The quarter marked a setback from strong prior performance, with higher credit loss provisions and signs of weakening credit trends balancing out steady loan demand. Overall, the period showed that the core lending business is expanding, but rising credit costs and reliance on one-off loan sales remain issues.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $0.32 | $0.49 | $1.11 | (71.2%) |
| Revenue | $376.8 million | $399.48 million | $372.2 million | -41.2% |
| Net Interest Income | $376.8 million | $641 million | -41.2% | |
| Net Income Attributable to Common Stock | $67.3 million | $247.4 million | (72.8%) | |
| Net Interest Margin | 5.31% | 5.36% | (0.05 pp) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
SLM’s Business and Areas of Focus
SLM is a leading private education lender, filling the gap for students and families when federal aid and family contributions fall short. It primarily offers private education loans targeted at students in four-year degree programs. The company is not a federal student loan provider but instead competes with banks and other specialist finance firms for private lending business.
The recent focus for SLM centers around growing private education loan originations, maintaining strong relationships with over 2,000 colleges and universities, and navigating a strictly regulated financial environment. Success depends on loan growth, effective risk management on credit losses, disciplined capital returns through dividends and buybacks, and staying compliant with evolving regulations in the education and lending space.
Key Events and Financial Results for the Quarter
Private education loan originations reached $686 million. Average private education loans outstanding rose 10% compared to the prior year, reaching $22.6 billion of average private education loans outstanding, net. While core interest income was flat year over year, reflecting the absence of one-time loan sales that previously boosted results.
Expenses (GAAP) increased slightly to $167 million from $159 million in Q2 2024, with management maintaining a disciplined approach but not delivering major cost improvements. The net interest margin, which measures the spread between interest income on loans and funding costs, slightly narrowed to 5.31% from 5.36% in Q2 2024. While yields on loan assets held steady at 9.25%, Funding costs rose to 4.22%. This change contributed to the margin compression seen during the quarter.
Credit metrics showed movement in the wrong direction. Delinquencies over 30 days rose to 3.51%, up from 3.34% in Q2 2024. Net charge-offs, which are loans unlikely to be collected and thus written off, increased to 2.36% of average loans in repayment, from 2.19% in Q2 2024. The provision for credit losses (GAAP) soared to $149 million from $17 million in Q2 2024, largely due to higher originations and less favorable economic outlook, as well as the absence of large reserve releases seen in the prior year.
A notable one-time factor was the lack of sizable loan sales, which had previously produced outsized non-interest income. Non-interest income (GAAP) fell to $27 million from $142 million in Q2 2024, emphasizing the volatility that loan sales bring to the company’s reported figures. On capital returns, SLM repurchased 2.4 million shares for $70 million, and paid a quarterly dividend of $0.13 per share. The company’s capital position remained strong, with total risk-based capital at 12.8% and a Common Equity Tier 1 ratio of 11.5%.
Product Details: Private Education Loans
SLM’s main product is private education loans—unsecured loans made directly to student borrowers, typically with a creditworthy cosigner. The loans are used to cover educational expenses not funded by federal loans, grants, or personal savings. The company’s strategy of focusing on students at four-year institutions, and requiring school certification plus cosigners, seeks to ensure good credit quality and lower delinquencies.
Looking Ahead: Management Guidance and What to Watch
SLM projects GAAP diluted earnings per share between $3.00 and $3.10 for the full year, private education loan origination growth of 6–8% for the full year, and net charge-offs within a range of 2.0–2.2% for the full year. No notable changes to guidance were made in the earnings announcement.
With these targets unchanged, investors should keep a close eye on credit performance, as higher credit provisions or deteriorating loan quality could further pressure profits. Trends in non-interest income (GAAP), which can fluctuate due to loan sale activity, will also be important.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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