OneMain Holdings, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 Performance: Strong earnings growth with full-year C&I earnings per share at $6.66 (+36% YOY), capital generation at $913 million (+33% YOY). Revenue grew 9% supported by higher yields and competitive environment.
• Product Innovations: Personal loans saw growth from debt consolidation, automated income verification, new products like home-secured lending, and expanded channels. Auto finance completed tech migration and partnered with Ally. Credit card refined offerings and used digital engagement for efficiency.
• Operational Improvements: Optimized branch model, expanded central sales/collections, launched AI-powered tool for team members to access policies, improving productivity and customer service. Financial wellness platform on mobile app saw 36% increase in users, and CreditWorthy program reached over 600,000 high school students.

Segment Performance

• Personal Loans: Receivables grew 6% to over $26 billion in 2025. Revenue growth was driven by initiatives like debt consolidation, automated income verification, and new products. It contributed significantly to overall receivables growth.
• Auto Finance: Receivables reached $2.8 billion. The year saw migration of legacy auto lending to new technology infrastructure, growth in the dealer sales force, and a partnership with Ally Financial on the ClearPass program, expanding into new dealerships and markets.
• Credit Card: Receivables grew to $936 million with nearly 1.1 million customer accounts by year-end. Product offerings were refined with new cards, and digital engagement reduced customer calls per account by 25%, driving efficiency.

Guidance

• Managed Receivables: Expected to grow 6%-9% in 2026 supported by product innovation and new products.
• Net Charge-offs: C&I net charge-offs expected in the range of 7.4%-7.9% in 2026, assuming soft labor market and persistent inflation; could be lower if macro improves.
• OpEx Ratio: Expected to be modestly better than 2025 at approximately 6.6% as expenses are managed while investing in growth.
• Capital Allocation: Bias towards share repurchases in 2026 and beyond while maintaining dividend, with $1 billion share repurchase program approved through 2028.

Risks

• Macroeconomic Uncertainties: Persistent inflation and potential weakening labor market pose risks to credit performance.
• Back Book Impact: The pre-August 2022 back book continues to be a headwind to delinquency and losses, comprising 17% of 30-plus delinquency but only 6% of the portfolio.
• Card Business Impact: Credit card net charge-offs improved but still impact C&I losses, with card contributing about 10 basis points more to losses in 2026 than in 2025.

Question and Answer

Q: Could you tie together the credit outlook with the guide for 2026 losses?

A: Jenny Osterhout noted 2025 had major loss improvement, but 2026 guide considers back book delinquency impact, card business contribution to losses, and macro assumptions (soft unemployment, persistent inflation). Losses expected higher in first half and lower in second half.

Q: What's the plan if the ILC application is approved?

A: Douglas Shulman said an approved ILC would take about a year to set up, be accretive, allow serving more customers, standardized rates/structure, access to deposits, and diversify the balance sheet, likely a 2027 event.

Q: How does the Ally partnership and new products roll out?

A: Douglas Shulman said the homeownership product is piloted, and the Ally partnership started with existing dealer relationships, rolling out further. New products are piloted to ensure performance before full rollout.

Q: What's the share repurchase pace outlook for 2026?

A: Douglas Shulman stated bias towards share repurchases in 2026 and beyond unless other attractive capital uses arise, with fourth quarter repurchases higher than previous periods.