SLM Shares Soar; Co. Sees Loan Defaults Improving

NEW YORK (AP) — Shares of SLM Corp., the student lender known as Sallie Mae, rallied Wednesday after the company said it thinks charge-offs on student loans peaked in the third quarter and that improving credit markets may allow it to make more money on loans.

Charge-offs, or loans written off as not being repaid, rose to $443 million in the June-September period from $352 million in the second quarter, but the outlook is brightening as the profile of its borrowers improves, according to company officials.

"We expect credit quality to improve earnings in subsequent periods," SLM Corp. CEO Albert Lord said in a statement Tuesday.

That upbeat sentiment was echoed by Sallie Mae CFO Jack Remondi in a conference call with investors and analysts Wednesday.

Defaults likely peaked in the third quarter, with rates improving from July to September, Remondi said. In October, he expects a 25 percent decline in charge-offs from July, with improvement continuing into 2010 even if the economy doesn't get better, he said. The company also increased its operating earnings outlook above Wall Street expectations for the fourth quarter and 2010.