To provide some context, in last year's 4Q conference call, Discover's student loan product was mentioned all of once..."Our total loan portfolio grew 6% year-over-year to $51 billion with Discover personal loans and Discover student loans contributing about 2% points to that growth." Now with credit card loans declining, student loan growth have helped to offset some of this decline:
Before diving into the conference call, I thought I would wade into their supplement to their earnings call (Oh no! I am having flashbacks to my time as an investment analyst and creating those earnings models!). The supplement shows how their guaranteed student loan business grew by over $1 billion and private loans by almost $500 million in the past twelve months (or about a 5% share in an $11 billion private loan market). Figures shown below are loan balances at quarter end expressed in thousands of dollars):
|Quarter||Federal Loans||Private Loans|
Note: Private loan balances are based on assumption of 70/30 mix between federal and private loans, which Discover confirmed in the call today.
Here are excerpts from a transcript of their 4Q 2009 conference call today (thanks to Seeking Alpha):
- Disciplined growth in student loans:
- Note that two of the leading players in the private student loan market, Sallie Mae and Citibank, saw loan originations in the most recent quarter drop 58% and 47% respectively.
- Wells Fargo noted in their 3Q conference call that their private loan originations were up 10% YTD.
- 2/3 to 70% of student loans made are of the government guaranteed variety; private loans focused on 600 schools:
- On mix of federal vs. private loans and profitability of private loans:
- May participate in loan participation and purchase financing programs for federal student loans originated by FFELP lenders for 2009-10 (Discover did not participate in those programs in 2008-09):
Also, in their 4Q earnings announcement released earlier today, they noted that their student loan portfolio grew by $513 million, which based on earlier ratios (70% federal/30% private) suggests about a $150 million increase in private loans over the September to November period: "The student loan portfolio grew $513 million in the quarter while credit card loans decreased $670 million."