Student Loan Corp. 2Q earnings fall 40 percent

Student Loan Corp. said Friday second-quarter profit fell 40 percent, weighed down by an increase in its provision for loan losses.

For the three months ended June 30, the company reported net income of $42 million, or $2.10 per share, compared with $70.5 million, or $3.53 per share, in the year-ago quarter.

The company set aside $45.8 million during the quarter to cover bad loans, compared with $3.9 million in the prior-year period. The increase was driven by losses inherent in the higher risk, uninsured segment of the company's private education loan portfolio, Student Loan said.

Net interest income, the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, rose 16 percent to $119.4 million from $102.9 million in the second quarter of last year. The increase was driven by higher average loan balances, the company said.

Total other income, including fees and gains on loans sold, fell 32 percent to $41.1 million from $60.5 million. Results were hurt by a $29 million decrease in gains on securitized loans due to unfavorable market conditions.

Operating expenses rose 13 percent to $51.8 million from $45.8 million in the 2007 quarter.

During the quarter, the company completed a $2 billion securitization.

Citibank N.A., a unit of Citigroup Inc., is the company's largest shareholder. Citibank owns an 80 percent stake in the company.