Navient share price pops on earnings

Student loan servicer Navient on Wednesday released improved quarterly earnings that prompted investors to bid up the stock price.

One factor was the company’s new share repurchase program involving as much as $1 billion of the company’s common stock.

“This new share repurchase program demonstrates our ongoing ability to generate capital and our commitment to return excess capital to our shareholders,” said Jack Remondi, president and CEO of Navient, in a statement.

The new share buyback plan, effective immediately, is in addition to the one approved by the board in 2018.

Some highlights from the third-quarter earnings included stronger net interest margins “as we continue to develop innovative lower-cost options to finance our student loan portfolio," Remondi said in a conference call to discuss earnings. "This has eliminated the need for us to access more expensive unsecured debt this year and reduce the outstanding balance by $1 billion.”

Navient’s adjusted core earnings per share totaled $0.65 in the third quarter versus $0.56 from the same quarter last year.

On Wednesday, the positive numbers drove the shares to close at $12.94, a 6.5% rise.

Navient’s stock has been under pressure in recent years from an overhang of federal and state lawsuits against the Wilmington-based student loan servicer.

In his remarks, Remondi addressed the expected decision by the Department of Education on renewal of contracts with servicers.

The current contracts that the major servicers, including Sallie Mae, Pennsylvania Higher Education Assistance Agency (PHEAA), and Navient, have with the Department of Education are set to expire in December.

“They have signaled an intent to extend those, but we haven’t seen the specific proposals at this stage in the game,” Remondi said. “We service 5.7 million accounts for the Department of Ed today. Certainly this is an important contract for us and we think we do an outstanding job on this side — for the department and more importantly for the customers, but the entire contract represents less than 8% of our total revenue.”

Pennsylvania ranks second in the nation in college-graduate debt, and the Philadelphia area represents a hot spot for college loan debts.

Nationally, student loans total $1.6 trillion and affect 45 million Americans, according to LendEDU. Navient in Wilmington and PHEAA in Harrisburg are two of the country’s largest loan servicers.

Both are routinely criticized for customer service, and are facing lawsuits alleging that they steer borrowers into costly loans and fail to give them the financial relief to which they are legally entitled. State attorneys general, including Pennsylvania’s Josh Shapiro, have sued Navient and the cases are ongoing.