OneMain Holdings, Inc. Q3 FY2024 earnings call

• Credit trends are positive: 30 to 89-day delinquency was 3.01%, down 27 basis points year-to-date. Net charge-offs were 7.5%, down about 100 basis points from last quarter. • Originations grew 13% year-over-year, the first year-over-year growth since tightening the credit box over two years ago, driven by a constructive competitive environment and product innovation. • Capital generation was $211 million, and C&I adjusted earnings were $1.26 per share. • Auto finance integration with Foursight is going well, operating under the OneMain auto brand. Credit card business added new accounts and improved customer self-service features. • Capital allocation priorities include investing in the business, maintaining the regular dividend, and share repurchases.

The company's segments showed varied performance. Consumer loan originations grew 13% year-over-year despite a tight underwriting pause, with receivables growing 11% year-over-year. Auto finance receivables were $2.3 billion at quarter end. Credit cards added 122,000 new accounts and $84 million in receivables during the quarter. Total revenue grew 8% to $1.5 billion, with interest income up 9% and other revenue down 1%.

• Expect origination growth to continue through the fourth quarter and end the year with at least $24.5 billion of receivables. • Interest expense is expected to land at approximately 5.2% for the year. • Full year net charge-offs are expected at the higher end of the range (7.7% to 8.3%), including the impact of the Foursight policy adjustment. • Operating expense ratio is expected to be around 6.7%.

• Macroeconomic uncertainties could impact credit trends and financial performance. • Competitive environment changes, such as private credit entering the space, could affect market dynamics and origination opportunities. • Delinquency trends, while positive, are subject to seasonal variations and macroeconomic shifts that could impact charge-off rates.

Q: Does the net charge-off guidance range for the full year include the impact of the Foursight policy adjustment?

A: Yes, it includes the impact of the Foursight policy adjustment.

Q: What's driving the guidance to be closer to the higher end of the range?

A: Delinquency trends in the past, slower origination growth earlier in the year, and macro environment improvements driving costs.

Q: Why didn't origination growth translate into higher loan balances as expected?

A: The company has a tight credit box, good competitive positioning, and is focused on pricing originations, with no surprising factors in the translation.

Q: What's driving the increase in asset yields?

A: Pricing actions in the competitive environment starting to take hold, primarily from the personal loan portfolio, with gradual impact on yield over time.

Q: When can we expect a year-over-year positive improvement to the net charge-off rate?

A: Delinquency trends translate to charge-off trends about two quarters later, and while 2025 guidance isn't provided now, delinquency improvements point to future positive changes.

Q: Any loosening of credit standards this quarter?

A: No aggregate loosening, but the company adjusts pockets of credit standards based on geography, risk rate, product, channel in micro detail.

Q: Impact of consumer behavior on branch network?

A: Most customers start online, but the company is omnichannel, with branches providing brand confidence and personal interaction benefits.

Q: Impact of alternative products on yield?

A: Growth of alternative products like auto finance will impact yield gradually, with auto finance being lower yielding but lower loss content, and credit card similar to personal loans in returns.

Q: OpEx ratio outlook for the fourth quarter?

A: Expenses can be lumpy, and while the OpEx ratio is expected to be around 6.7% for the year, the fourth quarter number is influenced by trends and lumpy expenses, with focus on efficient spending and operating leverage