Sallie Mae Drops Most in 10 Weeks as Charge-Offs Increase

SLM Corp. (SLM), the student lender known as Sallie Mae, fell the most in more than 10 weeks after reporting a drop in fourth-quarter profit as charge-offs increased, offsetting a climb in originations.

Shares of the Newark, Delaware-based company declined 2.8 percent at 4:30 p.m. in New York, the biggest drop since Nov. 7, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index advanced 0.6 percent.

Net income decreased to $348 million, or 74 cents per share, for the three months ended Dec. 31, from $511 million, or 99 cents, in the year-earlier period, Sallie Mae said yesterday in a statement distributed by Business Wire. Core earnings, which exclude items such as the market gains and losses of derivatives contracts, were $257 million, or 55 cents a share, the company said. That compared with an average estimate of 53 cents by eight analysts surveyed by Bloomberg.

The charge-off rate, or the percentage of loans that has been written off, rose to 4.2 percent from 3.5 percent, the company said.

The fourth quarter “was a disappointment on the charge-off side,” Chief Executive Officer Albert Lord said on a conference call to discuss the results with analysts and investors. The company expects charge-offs to decline “sharply” from the level seen in the last quarter, according to an earnings call presentation document today.

Sallie Mae made $514 million in education loans in the fourth quarter, a 12.5 percent increase from the year-ago period, according to the statement. The lender is forecasting at least $4 billion of originations in 2013.

Originations are rising as education debt balloons. Rising higher-education costs have swelled the outstanding amount of U.S. student loans to $1 trillion. More than one in 10 borrowers defaulted on their federal loans in the first three years they are required to make payments, the Education Department said in a Sept. 28 report.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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