Sallie Mae sees higher profit in 2010, stock jumps
NEW YORK - Sallie Mae, the largest U.S. student loan provider, forecast higher earnings in 2010, boosted by lower loan loss provisions and more stable credit markets, sending its shares up as much as 22.5 percent.
Sallie Mae, whose formal name is SLM Corp, also forecast loan losses will decline in coming quarters.
The lender estimated earnings per share would top $1.50 next year. Through the first three quarters of 2009 it lost 17 cents a share.
Sallie Mae has been hurt over the last year by disruptions in financial markets. Its assets generate interest based on commercial paper rates, while its liabilities are linked to the London Interbank Offered Rate, or LIBOR.
A recent stabilization in credit markets has already benefited Sallie Mae, helping the company beat analysts' earnings estimates in the third quarter.
We project chargeoff declines for the next six months, which is the period we can see most clearly. Earnings per share should increase through 2011, Chief Executive Albert Lord said in a conference call with analysts.
Sallie Mae said fourth-quarter loan loss provisions in its private loan portfolio would decline by 15 percent to 20 percent from the third quarter.
The credit picture appears to be stabilizing, with later-stage delinquencies declining, Ladenburg Thalmann analysts wrote in a research note.
Sallie Mae also estimated operating expenses would be flat in 2010.
The company's shares soared 22.5 percent to $10.90 in early trading on the New York Stock Exchange, their highest level in eight months. They later fell back to $10.63, up 19.4 percent. (Reporting by Juan Lagorio, editing by Gerald E. McCormick)
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