OneMain Holdings, Inc. Q2 FY2025 earnings call

• Strong Quarter Performance: Capital generation was $222 million, up 63% year-over-year. C&I adjusted earnings were $1.45 per share, up 42%. Total revenue grew 10% and receivables grew 7% year-over-year, crossing $25 billion. - Credit Trends: 30-plus delinquency was 5.07%, down 29 basis points year-over-year. C&I net charge-offs were 7.6% in the quarter, down 88 basis points from the second quarter of last year. Consumer loan net charge-offs were 7.2% down 110 basis points year-over-year. - Initiatives: Enhanced loan consolidation offering, added new data sources for income verification, streamlined loan renewal process for select customers, and tested credit card app cross-buy for personal loans. - New Businesses: Credit card business has over 920,000 customers and $752 million in receivables. Auto finance business, one year after acquiring Foursight, has seen growth in active dealers, originations, and receivables with conservative credit policies.

Personal Loan Business: Originations grew 9%, receivables ended the quarter at $25.2 billion, up 7% year-over-year. Consumer loan yield was 22.6%, up 19 basis points from the first quarter and 67 basis points year-over-year. Credit Card Business: Ended the quarter with $752 million of receivables, up 61% from a year ago, representing about 3% of total receivables. Auto Finance Business: Ended the quarter with over $2.6 billion of receivables, up $119 million from the last quarter. Active dealers grew by 14%, quarterly originations grew by 29%, and over $400 million of receivables were added.

• Total revenue growth is expected to be at the high end of the previously discussed 6% to 8% range. - C&I net charge-offs are expected to come in between 7.5% and 7.8%, narrowing to the lower half of the initial guidance range. - Managed receivables growth guidance of 5% to 8% is maintained. - Capital generation in 2025 will significantly exceed that of 2024.

• Macroeconomic uncertainties that could impact customer payment patterns. - Competitive environment that may lead to increased price competition. - Credit card portfolio still in early stages with potential for fluctuating losses as it matures.

Q: Moshe Orenbuch asked about competitive dynamics and growth drivers.

A: Doug and Jenny discussed the competitive environment, high-quality originations, and capital allocation, noting the company's strong positioning with loyal customers and enhanced product experiences.

Q: Terry Ma inquired about credit card portfolio timing and sizing.

A: Doug stated the card portfolio's yields will remain above 30% and the business is being grown measuredly, with no specific forward guidance on timing but confidence in long-term profitability.

Q: Mark DeVries asked how long credit improvement would persist.

A: Jeannette Osterhout mentioned liking the credit trends, seeing better roll rates, and expecting continued positive direction but couldn't specify an exact end to the tailwind.

Q: John Hecht asked about branch vs online channel.

A: Doug discussed serving customers across multiple channels, optimizing for customer preference, and focusing on branch team members' personalized service while enhancing digital app functionality.

Q: Richard Barry Shane asked about macro consumer health.

A: Doug explained underwriting is based on customer net disposable income, considering factors like income, spending, and remaining funds to afford loans.

Q: David Scharf asked about auto finance post-Foursight acquisition.

A: Doug discussed the auto business growth, disciplined underwriting with a 30% stress on models, and positive performance in both franchise and independent dealers with fast execution and good pricing for dealers