Why Sallie Mae Stock Jumped 10% Today

By Jordan WathenMarketsFool.com

What happened

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Shares of Sallie Mae (NASDAQ: SLM), formally SLM Corporation, are soaring by nearly 10% as of 10:30 a.m. EDT on Thursday after the company beat earnings expectations in the first quarter.

So what

Sallie Mae saw its net income to common shareholders jump to $89 million in the first quarter ($0.20 per diluted share), up from $61 million ($0.14 per diluted share) in the year-ago period. Results were helped primarily by a $58 million increase in net interest income and a $7 million decrease in provisions for credit losses.

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Sallie Mae earnings beat expectations, helped by lower provisions and higher net interest income. Image source: Getty Images.

The company originated $1.8 billion of private student loans in the first quarter, an increase of 2% over the year-ago period, bringing its average private student loan portfolio to $15.4 billion during the first quarter, a 31% increase over the year-ago period.

In a presentation, Sallie Mae emphasized the credit quality of its recent originations, pointing to the fact that 90% of its new originations had a cosigner and that its average borrower had a FICO score of 748.

Now what

Sallie Mae's guidance calls for full-year 2017 diluted core earnings per share of $0.70 to $0.72 and private education loan originations of $4.9 billion. Low delinquency rates and rising yields on its loan portfolio were major contributors to its better-than-expected earnings this quarter, a trend investors would like to see continue.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.