Sallie Mae Posts Big Gains in ARM Revenue for Quarter and Year

Student loan provider Sallie Mae late Wednesday reported a corporate-wide net loss of $139 million for the fourth quarter of 2007, but also reported a 31 percent increase in collection revenue for the quarter, a 13 percent increase for the year and a 40 percent jump in debt portfolios purchased.

Reston, Va.-based Sallie Mae (NYSE: SLM) said that it recorded revenue from debt collection of $76.1 million, a 31.4 percent increase from the fourth quarter of 2006 and a 44.1 percent increase over the third quarter of 2007. For the year, the company reported collection revenue of $271.5 million, a 13.2 increase over the total in 2006.

Sallie Mae owns collection agencies Pioneer Credit Recovery and General Revenue Corporation and has an 88 percent stake in the debt purchaser and collector Arrow Financial Services.

The company said in a supplemental earnings statement that the increase in collections revenue for the fourth quarter of 2007 versus the prior quarter was primarily due to growth in purchased paper asset balances.

Sallie Mae aggressively ramped-up its debt buying in 2007, purchasing portfolios valued at $6.1 billion for $556 million, compared to the $278 million it spent in 2006 on $3.4 billion in face value debt. In the fourth quarter of 2007 alone, Sallie bought portfolios worth $2.2 billion for $198 million, a 40.8 percent increase over what the firm bought in Q4 2006.

Corporate-wide, Sallie reported a loss of $139 million in the fourth quarter on a “core earnings” basis compared to net income of $326 million in the fourth quarter of 2006. For the full-year 2007, “core earnings” net income was $560 million, compared to $1.3 billion in 2006. Sallie Mae blamed a $750 million loan loss set aside in the fourth quarter for both the quarterly loss and the year-over-year earnings slide.