Sallie Mae reports that 4Q losses narrowed

RESTON, Va. - Sallie Mae, the nation's largest student lender, said Wednesday that its losses narrowed in the fourth quarter, although delinquencies increased and the company boosted its provisions for private loan losses.

After paying preferred dividends, Sallie Mae, formally called SLM Corp., reported a fourth-quarter loss of $243.3 million, or 52 cents per share. That compared with a wider loss of $1.64 billion, or $3.98 per share, a year earlier.

The company said its fourth-quarter 2008 results include the impact of a $439 million unrealized loss, before taxes, on some derivative contracts.

Sallie Mae reported that its core, or adjusted, earnings in the latest quarter totaled $65 million, or 8 cents per share, compared with a loss of $139 million, or 36 cents per share, in the year-earlier quarter.

Analysts polled by Thomson Reuters, who generally exclude special items, forecast quarterly earnings of 17 cents a share.

Core earnings exclude treatment for student loans bundled together as securities and derivatives, the complex financial instruments used as a hedge against swings in interest rates.

Loan delinquencies rose during the fourth quarter, Sallie Mae said, with 2.6 percent of traditional managed private student loans more than 90 days delinquent as of Dec. 31, 2008. The 90-day delinquency rate was 2.3 percent at Sept. 30, 2008.

Private student loans are not backed by the government and carry higher interest rates.

As a result, Sallie Mae provided $348 million for managed private loan losses in the fourth quarter, which reduced earnings per share by 20 cents from the prior quarter. The addition brought the company's full-year managed private loan provision to $874 million.

Chief Executive Albert L. Lord stressed, however, that the lender has benefited from the federal government's efforts to improve liquidity and said the company will continue providing student loans this year.

The company originated $4.8 billion in student loans in the 2008 fourth quarter and $24.2 billion in the full-year 2008. Federal student loan originations jumped 25 percent year-over-year to $3.9 billion in the fourth quarter of 2008.

Sallie Mae noted that its core earnings operating expenses dropped 26 percent during the fourth quarter to $270 million.

Core net interest income, the difference between how much it costs a lender to borrow money and how much it receives from lending money, totaled $553 million in the fourth quarter and $2.4 billion for the full-year.

For the full year, Sallie Mae reported losses of $323.8 million, or 69 cents per share, after preferred dividends. That compared with losses of $933.5 million, or $2.26 per share, in 2007.

The 2008 results included a $552 million pretax loss on derivative contracts.

Full-year core earnings net income totaled $526 million, or 89 cents per share, down from $560 million, or $1.23 per share, in 2007.

Analysts forecast 2008 earnings of $1.05 per share.

Sallie Mae's shares gained 73 cents, or 6.7 percent, to close at $11.70 on Wednesday. The stock has traded between $4.19 and $25.05 during the past 52 weeks.

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