OneMain Holdings, Inc. Q3 FY2025 earnings call

• Strong revenue growth and positive credit trends led to excellent capital generation ($272 million, up 29% YOY). - C&I adjusted earnings $1.90 per share, up 51%. Total revenue grew 9% and receivables grew 6% YOY. - Originations increased 5% driven by granular data, product innovation, and customer experience. - Credit metrics improved: 30-plus delinquency down 16bps YOY, C&I net charge-offs down 51bps, consumer loan net charge-offs down 66bps. - Initiatives like simplified debt consolidation, new data sources, streamlined loan renewal, and credit card origination channel. - Credit card business passed 1 million customers, auto finance receivables up. - Dividend increased by $0.01 quarterly to $4.20 per share, $1 billion share repurchase program approved.

Personal Loans: Originations increased 5%, receivables grew 6% year-over-year. 30-plus delinquency was 5.41%, down 16 basis points year-over-year. C&I adjusted earnings were $1.90 per share, up 51%. Credit Cards: Ended the quarter with $834 million of receivables, passed 1 million customers, revenue yield over 32%, net charge-offs down nearly 300 basis points from last quarter. Auto Finance: Ended the quarter with over $2.7 billion of receivables, up about $100 million from the last quarter.

• Narrowed managed receivables growth guidance to 6%-8% (previously 5%-8%). - Expect total revenue growth of approximately 9% (above prior 6%-8% guidance). - C&I net charge-offs expected between 7.5% and 7.8%, operating expense ratio remains ~6.6% for the year.

• Economic uncertainty could impact customers and portfolio performance. - Volatility in ABS markets may affect access to funding.

Q: Terry Ma asked about the health of the nonprime consumer and delinquency trends.

A: Douglas Shulman stated auto credit is performing in line with expectations, consumer net disposable income is strong, and branch manager surveys show stability. Jenny Osterhout mentioned delinquencies are in line with expectations and expect continued year-on-year improvement in consumer loan net charge-offs.

Q: Mark DeVries inquired about underwriting posture and funding.

A: Douglas Shulman said they have a conservative underwriting posture with a 30% stress overlay. Jenny Osterhout explained funding costs came in lower due to favorable bond issuances and used proceeds to redeem higher-priced bonds, enhancing balance sheet flexibility.

Q: Mihir Bhatia asked about buybacks and gain on sale.

A: Douglas Shulman said buybacks are part of capital allocation strategy with $1 billion program approved. Jenny Osterhout mentioned gain on sale increased from whole loan sale program and they're evaluating private credit opportunities as additive to strategy.

Q: Moshe Orenbuch asked about origination growth and ILC charter.

A: Douglas Shulman said originations growth due to product innovation, new channels, and data sources. ILC charter would be accretive to franchise value for deposit funding and serving more customers.

Q: Donald Fandetti asked about ABS market access.

A: Douglas Shulman and Jenny Osterhout stated they've always accessed ABS market due to trusted underwriting and developed program, confident in continued access.

Q: Kyle Joseph asked about government shutdown impact and auto portfolio.

A: Douglas Shulman said no material impact from government shutdown, auto portfolio is stable and they're pacing growth carefully.

Q: John Pancari asked about fourth quarter origination growth and M&A.

A: Douglas Shulman said origination growth due to product innovation and channel additions. They're selective about M&A opportunities, looking for strategic, accretive deals.

Q: Vincent Caintic asked about net charge-off guidance and capital generation.

A: Jenny Osterhout said they brought down net charge-off guidance last quarter and are happy with credit performance. Douglas Shulman stated capital generation goal remains $12.50 per share, not reliant on bank charter.