Navient (NAVI) Q1 Earnings & NII Top Estimates, Provisions Dip

Navient Corporation NAVI has reported first-quarter 2023 adjusted earnings per share of $1.06, surpassing the Zacks Consensus Estimate of 88 cents. The reported figure compares favorably with the year-ago quarter’s 90 cents.

A fall in core net interest income (NII) and total other income, as well as higher expenses, has hindered the results. However, a decrease in expenses was a tailwind.

Navient’s GAAP net income was $111 million, down from $255 million in the prior-year quarter.

NII & Expenses Decrease

Core NII declined 8.3% year over year to $253 million in the first quarter but surpassed the Zacks Consensus Estimate of $230.6 million.

Total other income plunged 61% to $88 million. The downside stemmed from a decrease in all components.

Provision for loan losses was a benefit of $1 million against expenses of $16 million in the prior-year quarter.

Total expenses plunged 9% year over year to $192 million.

Quarterly Performance of Segments

Federal Education Loans: The segment generated a net income of $87 million, down year over year from $107 million.

As of Mar 31, 2023, the company’s net Federal Family Education Loan Program (FFELP) loans were $42.14 billion, down 3.2% sequentially.

Consumer Lending: The segment reported a net income of $110 million, which increased from $79 million in the year-ago quarter. Benefits from the provision for loan losses aided the segment’s performance.

The private education loan delinquency rate greater than 30 days was 4.5% compared with 4% in the prior-year quarter.

As of Mar 31, 2023, the company’s private education loans were $18.27 billion, down 2.4% from the prior quarter. In addition, Navient originated $135 million of private education refinance loans in the reported quarter.

Business Processing: The segment reported a net income of $4 million, plunging from $14 million in the year-ago quarter.

Liquidity

In order to meet liquidity needs, Navient expects to utilize various sources, including cash and investment portfolio, the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered student-loan assets, and distributions from securitization trusts. It may also draw down on the secured FFELP Loan and Private Education Loan facilities, issue term asset-backed securities (ABS), enter additional Private Education Loan and ABS repurchase facilities or issue additional unsecured debt.

Notably, it had $570 million of total unrestricted cash and liquid investments as of Mar 31, 2023.

Capital Deployment Activities

In the first quarter, the company paid out $21 million in common stock dividends. In the reported quarter, Navient repurchased shares of common stock for $85 million. As of Mar 31, 2023, there was $515 million of the remaining share-repurchase authority.

Our Take

Navient’s diversified business segments will support revenue growth. It has been an eminent portfolio holder of private education loans. In the first quarter, the company recorded a decline in expenses that alleviated the bottom-line pressure.

However, a fall in NII and fee income is worrisome.

Navient Corporation Price, Consensus and EPS Surprise

Navient Corporation price-consensus-eps-surprise-chart | Navient Corporation Quote

Currently, Navient carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Commerce Bancshares Inc.’s CBSH first-quarter 2023 earnings per share of 95 cents surpassed the Zacks Consensus Estimate of 92 cents. The bottom line increased 3.3% from the prior-year quarter.

CBSH’s results benefited from an increase in NII, driven by a rise in loan balance and higher interest rates. Also, non-interest income grew in the quarter. However, a rise in non-interest expenses and provisions was a major setback. The company witnessed a decline in deposit balance in the quarter.

Hancock Whitney Corporation’s HWC first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter.

HWC’s results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.

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