Navient reported its first quarter earnings this week through its recently expanded segment reporting to reflect the company’s wider business mix.
On April 24, Navient stated from its earnings report in the first quarter that it had $500 million of originations in private education refinance loans, a 43 percent fall in private education loan charge-offs and a 32 percent jump in business processing fee revenue year over year, according to a press release.
The company reported a strong start for 2018. “Credit continued to improve, with the private education charge-off rate falling to 1.4 percent, as the economy continues to grow,” said Navient CEO Jack Remondi.
In the first-quarter earnings report, Navient broke down its three operating segments: Business Processing and Other, Consumer Lending, and Federal Education Loans to share their numbers. Here are some highlights.
Business processing earnings: Earnings were $10 million in the first quarter, compared to $3 million in 2017’s first quarter. This came from a $29 million jump in fee income partly offset by the $20 million rise in operating expenses. These increases derived from the segment’s internal growth in contracts and Navient’s July 2017 acquisition of Duncan Solutions, a transportation revenue management company.
Consumer lending earnings: Earnings were $50 million in the first quarter, up from $38 million in 2017’s first quarter. This jump came from a $7 million increase in net interest income, an $18 million decline in loan losses provision and a $9 million fall in income tax expense. These were partially offset by a $21 million jump in operating expenses related to operating costs from Navient’s November 2017 acquisition of the online lender Earnest and the one-time $9 million fee paid for the $3 billion of private education loans.
Federal Education Loans earnings: Earnings were $141 million, up from $129 million in 2017’s first quarter. This year’s increase came from a $6 million drop in operating expenses and a $26 million decline in income tax expense stemming from the new tax law. These numbers were partially offset from a $3 million fall in net interest income and a $26 million decline in fee income.
What This Means for Navient
Well, Navient should care for several reasons aside from making money and improving its business. The news is a nice change of pace when you look at the developments over the last year.
Coming off of a disappoint fourth quarter in 2016, Navient became embattled in lawsuits and controversy over the first half of 2017. Starting in January, Navient was hit by a lawsuit from the Consumer Financial Protection Bureau (CFPB) for allegedly misleading consumers and incorrectly processing payments. In the wake of the lawsuit, Navient was staunchly defended by its CEO Jack Remondi.
Investors still had confidence in Navient’s business as Navient made several moves throughout the rest of the year. Navient bought JP Morgan’s student loan portfolio in April 2017, and the Earnest acquisition has already been mentioned.
Despite that, Navient was still on the hot seat. It was hit with a $300,000 finefor robo-calling and harassment. In October, the Pennsylvania Attorney General filed a lawsuit against Navient for deceptive loan practices. Not to mention, Senator Warren called for an SEC probe into Navient for suspected insider trading.
Needless to say, it was a tough year for Navient, but the student loan servicing giant seems to be looking up in 2018, at least financially speaking.
Author: Andrew Rombach
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