Here are some snippets from recent conference calls/earnings releases/supplementals regarding 3Q private student loan originations. This quarter tends to be the most important from a seasonal perspective and provides a good sense of how academic year originations will unfold. Reviewing past history indicates that 35-40% of a lender's originations come in this quarter. Here are reports from the leading private student lenders:
- Wells Fargo noted in their 3Q earnings supplemental released today (see page 8) that "private student lending (up 29% from 3Q09)" and also that they have had great success at growing loans in the Wachovia footprint (see slide #16), "Private student lending originations up 50% YTD in Wachovia footprint." Wells Fargo doesn't publish annual private loan data but SLA now estimates that they are rapidly approaching Sallie Mae in terms of new private loan originations.
- Sallie Mae in their conference call this morning (thanks to Seeking Alpha for the transcript) noted that "We originated $835 million in private credit loans in the quarter, a decrease of 6% from $893 million in the third quarter 2009." At the peak of the market in the 3Q of 2007, SLM originated $2.8 billion in loans, making the current quarter, a 68% decline from these levels. On the bright side, this is the first quarter in ten that originations have not fallen by 24% or more for SLM...but competitors growing their businesses, Wells Fargo and Discover, are now nipping at their heels, in a way that seemed inconceivable three years ago. At that time, SLM's annual private loan originations were 4.5 times greater than their nearest competitor. Look for more details on the SLM conference call and earnings release later today.
- Citibank's Student Loan Corporation, which is in the process of selling their private student loan business to Discover, provided this information in their 3Q earnings release earlier this week: "Originations for the quarter ended September 30, 2010 included new private education loan commitments of $0.2 billion, which was 45% lower than the same period in 2009, reflecting the Company’s refined origination strategy." The company had $346 million in originations in 3Q 2009, making originations for 3Q of 2010 about $190 million. This figure is down by 72% from the $682 million they originated in the 3Q of 2006.
- Meanwhile, JP Morgan Chase in their 3Q earnings supplement (page 17) indicated student loan origination volume of $0.2 million. While there may be a tail to second disbursements tied to FFELP loans that leaked into this quarter, this figure is probably almost all private student loan volume.
- Discover Financial, whose fiscal quarter ends in August instead of the September quarter-end for the companies mentioned above, saw a $60 million increase in their private student loan portfolio (from $820 million to $880 million) between quarters. This figure excludes the surge of volume that comes in September as students return to school. It also is not a "pure" origination figure as it only represents an increase in their portfolio, which is impacted by interest rates on deferred loan balances, prepayments and other factors.
SLA will be updating their private student loan market share projections for 2010-11 by the end of the month but it is clear from the most recent quarter that competition atop the industry is heating up.