Citibank's Private Student Loan Originations Down 47% In 3Q; Federal Loan Volumes Down 10%

Citibank's Student Loan Corporation reported 3Q earnings today.  Here are the highlights:

• Private student loan originations fell 47% to $0.3 billion due to higher underwriting standards:

"The Company also made new CitiAssist® loan commitments of $0.3 billion, which was 47% lower than the same quarter of 2008, continuing the recent effort to originate higher quality private education loans."

• Based on SLA market share estimates, Citibank was the #2 originator of private loans in 2007, with about a 10% share. 

• Federal loan originations also fell driven by schools moving to the Direct Lending program:

"Originations for the quarter included FFEL Program Stafford and PLUS loan originations of $1.9 billion, a 10% decrease from the same quarter of 2008. This decrease is largely due to schools moving from the FFEL Program to the Department of Education`s Direct Lending Program."

• Citibank was the #2 originator of FFELP loans for FY08 with $6.2 billion in originations, according to their 2009 Annual Meeting presentation

• Improved liquidity position through series of financings:

"During the third quarter of 2009, the Company leveraged its portfolio to secure an additional $5.2 billion of long-term structural liquidity. This included $1.9 billion from the U.S. Department of Education sponsored conduit, Straight-A Funding, LLC (the Conduit). This brings the cumulative funding from the Conduit to $10.4 billion. The Company also executed two securitizations, a Federal Loan Consolidation securitization which provided $1.9 billion of funding, and a private education loan securitization under the Term Asset-Backed Securities Loan Facility which provided $1.4 billion of funding...During the third quarter of 2009, the Company completed a $1.1 billion loan sale to the Department of Education through the Loan Purchase Commitment Program (the Purchase Program). These proceeds were used to pay back funding from the Participation Program. Since the inception of the Purchase Program, the Company has sold $2.3 billion of loans to the Department of Education."

• Credit losses stabilized in the 3Q: 

"Net credit losses of $26.1 million in the third quarter ended September 30, 2009 were relatively flat compared to the second quarter of this year."

With Sallie Mae reporting earnings next Tuesday (with conference call on Wednesday), I suspect that they will also report a 40%+ decrease in private student loan originations based on comments by executives in a September investor conference.  It also will be interesting to see what happens with SLM's FFELP volumes, as it will indicate whether Citi's drop in this area was an industry-wide phenomenon (DL gaining on FFELP) or a company specific-issue (Citi losing market share to Sallie Mae).