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Sallie Mae Focused on Growth Initiatives: Time to Buy?

Zacks Equity Research
Updated

On Aug 31, 2015, we issued an updated research report on Sallie Mae SLM.  With a leading position in the student lending market, this Delaware-based firm remains focused on growing its consumer-banking business, following the split of SLM Corporation into two distinct publicly-traded entities last year.

Among several of its objectives set for 2015, Sallie Mae aims to enhance Private Education Loan assets and revenues, maintain a strong capital position and complete the process to originate and service Private Education Loans independently. We believe the gradual achievement of these goals will boost the overall performance of the company.

As originations increased 8% year over year in the first-half 2015, the company seems to be on track to achieve 2015 target of $4.3 billion in originations. Further, in June 2015, the company implemented the final phase of the bank’s new loan origination platform. Additionally, management expects the efficiency ratio to decline steadily over the next several years through expense management and growing loans in the service portfolio to a level that commensurate with the loan origination platform.  

Sallie Mae’s growth prospects look further promising as the U.S. economy is gaining traction. The declining unemployment rate and expectation of modest growth in student enrollment should enhance the company’s business.

Nevertheless, certain concerns keep us apprehensive. These include a competitive environment in the saturated banking space, absence of large scale benefits and the prevailing stringent regulatory landscape.

Over the past 30 days, the Zacks Consensus Estimate remained stable at 58 cents per share and 69 cents per share for 2015 and 2016, respectively.

Sallie Mae currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the finance space Regional Management Corp. RM, Great Southern Bancorp Inc. GSBC and Flagstar Bancorp Inc. FBC. All three stocks sport a Zacks Rank #1(Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SLM CORP (SLM): Free Stock Analysis Report
 
FLAGSTAR BANCP (FBC): Free Stock Analysis Report
 
GREAT SOUTH BCP (GSBC): Free Stock Analysis Report
 
REGIONAL MANAGE (RM): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research