SLM Corp (NASDAQ:SLMBP) Q4 2014 Earnings Conference Call - Final Transcript

Jan 22, 2015 • 08:00 am ET

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SLM Corp (NASDAQ:SLMBP) Q4 2014 Earnings Conference Call - Final Transcript

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Q & A
Operator
operator

(Operator Instructions) Brad Ball, Evercore ISI.

Analyst
Brad Ball

Just starting with the expected gain on sales premium, the 7.5%. Steve, I wondered if you could talk about what gives you confidence that you would be able to do that 7.5% in two transactions in the second quarter and the third quarter. And whether there is any change in the pricing you would expect now that you are retaining servicing as opposed to selling with service retained -- with servicing transferred?

Executive
Steve McGarry

Sure, Brad. So it's always difficult to get the first transaction off and that was the 1.2 billion that we sold in August, we did 400 with the third-party and sold another $800 million to Navient. Private student loan portfolio sales, so far, have not been done in the marketplace. So the first transaction is very much a price exploration process. We were very pleased with the 7.5% premium that we received. We spend a lot of time with our ABS bankers as you might imagine and as we look at transactions in other asset classes and how the pricing for typical ABS loans has evolved since we did that transaction there is definite evidence that the premium should be somewhat stronger the next time around.

Recent example of that would be the Navient transaction that was recently executed, that deal had a mix of smart options and older collateral in it, so our collateral would be somewhat more high quality. And let's say securitized plus a key point was that they were able to get a full 100% release of cash flow on their deal, that is new and it's evolution of how student loans have been securitized. Over the last three or four years have typically been turbo charges with turbo deals with cash going to pay down the bond, freeing up more cash makes these transactions more appealing and more valuable to ultimately the new holders, which was what drives the price on these premiums.

So there is a lot of supporting evidence in the market that suggests that the pricing should be somewhat better the next time around. But again we're not coming until late March or early April, so who knows what can transpire between now and then.

And I should go to your second question was Brad, oh servicing retained. So I would view that as basically a sweetener, I mean the buyer pays

Executive
Steve McGarry

the servicing fee regardless of who is servicing, so we will receive the premium and the servicing fee now as we go forward in future.

Analyst
Unidentified Participant

Great.

Executive
Ray Quinlan

The servicing dynamic as you mentioned is similar is identical from a buyers' point of view (inaudible).

Analyst
Brad Ball

Thank you, and then Ray in your comments, a couple of things. You mentioned a gain in market share, I just wondered if you could talk about what do you think is driving that sort of 1% to 2% pickup in market share. And you also noted that you saw that private education loans would reach $15 billion by the