), also known as Sallie Mae, declared that it has sold its
remaining interest in its SLM Student Loan Trust 2007-4
securitization to a third party. However, under the existing
contract, Sallie Mae will continue servicing the student loans in
The sale will result in the removal of student loans of $3.8
billion and associated liabilities worth $3.7 billion from Sallie
Mae's balance sheet. Further, the gain from the deal will result
in an addition of 8 cents per share to Sallie Mae's full-year
2013 GAAP as well as core earnings.
In March 2012, both the House and the Senate passed a bill to
overhaul the student loan program, ending the Federal Family
Education Loan Program (FFELP) that provided federal subsidies to
As a result of this, federally guaranteed student loans would
be originated under the Direct Loan Program run by the U.S.
Department of Education. It would eliminate the role of private
lenders. Therefore, Sallie Mae stopped originating new federally
guaranteed student loans after June 30 to comply with the
Despite challenges, we believe that its leading position in
the student lending market, diversifying efforts and increasing
private student loan originations would help the company navigate
the current cycle.
Suspension of the new federal student loan origination, in
order to comply with the legislation, will continue to impact
revenue generation capabilities of student lenders like Sallie
Mae. However, we believe that the company's efforts, coupled with
the sluggishly improving economy, would bolster its earnings by
expanding its private education loan business and reduce its loan
loss provision expenses.
Sallie Mae retains a Zacks Rank #4 (Sell). Financial firms
that are performing well include
Fifth Third Bancorp
Regions Financial Corp.
). BankUnited carries a Zacks Rank #1 (Strong Buy) and the other
two hold a Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
SLM CORP (SLM): Free Stock Analysis Report
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