Q2 2024 OneMain Holdings Inc Earnings Call

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Operator: Please stand by; we're about to begin. Welcome to the OneMain Financial second quarter 2024 earnings conference call and webcast. Hosting the call today from OneMain is Peter Poillon, Head of Investor Relations. Today's call is being recorded.

Please standby we're about to begin.

Speaker Change: Welcome to the Onemain financial second quarter, 2024 earnings conference call and webcast.

Peter R. Poillon: Hosting the call today from Onemain as Peter point head of Investor Relations.

Operator: At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.

Speaker Change: Today's call is being recorded at this time all participants have been placed in a listen only mode and the floor will be open for your questions. Following the presentation.

Speaker Change: If you would like to ask a question at that time. Please press star one on your telephone keypad.

Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.

Operator: We do ask that you limit yourself to one question and one follow-up and please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Peter Poillon. You may begin. Thank you, Operator. Good morning, everyone, and thank you for joining us.

Speaker Change: We do ask that you limit yourself to one question and one follow up and please pick up your handset to allow optimal sound quality.

Speaker Change: Lastly, if you should require operator assistance, please press star zero.

It is now my pleasure to turn the floor over to Peter Polian you may begin.

Speaker Change: Operator.

Peter R. Poillon: Everyone and thank you for joining US let me begin by directing you to page two of the second quarter 2024, Investor presentation, which contains important disclosures concerning forward looking statements and the use of non-GAAP measures.

Peter R. Poillon: Let me begin by directing you to page two of the second quarter 2024 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the Investor Relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business prospects. These forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on these forward-looking statements.

Peter R. Poillon: Presentation can be found in the Investor Relations section of the Onemain website.

Peter R. Poillon: Our discussion today will contain certain forward looking statements, reflecting management's current beliefs about the company's future financial performance and business prospects and these forward looking statements are subject to inherent risks and uncertainties and speak only as of today.

Peter R. Poillon: Factors that could cause actual results to differ materially from these forward looking statements are set forth in our earnings press release.

Peter R. Poillon: We caution you not to place undue reliance on forward looking statements.

Peter R. Poillon: If you may be listening to this via replay, at some point after today, we remind you that the remarks made herein are as of today, July 31st, and have not been updated subsequent to this call. The call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Jenny Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. I'd like now to turn the call over to Doug. Thanks, Pete. Good morning, everyone, and thank you for joining us today.

Peter R. Poillon: If you may be listening to this via replay at some point. After today, we remind you that the remarks made herein are as of today July 31, and have not been updated subsequent to this call.

Peter R. Poillon: Our call. This morning will include formal remarks from Doug Shulman, our chairman and Chief Executive Officer, and Jenny <unk>, Our Chief Financial Officer.

Speaker Change: After the conclusion of our formal remarks, we will conduct a question and answer session I.

Peter R. Poillon: I'd like to now turn the call over to Doug.

Doug: Thanks, Pete Good morning, everyone and thank you for joining us today.

Douglas H. Shulman: I'll start by saying that we feel very good about our results for the first half of the year. The tightened underwriting standards that we've been operating with for almost two years are resulting in our credit metrics continuing to head in the right direction. During the second quarter, we also saw originations volumes start to pick up, and we expect to see stronger originations in the second half of the year. We also continue to make progress on our long-term strategy of building world-class credit card and auto finance businesses.

Speaker Change: I'll start by saying that we feel very good about our results in the first half of the year. The tightened underwriting standards that we've been operating with for almost two years are resulting in our credit metrics continuing to head in the right direction.

Peter R. Poillon: During the second quarter. We also saw our originations volumes start to pick up and we expect to see stronger originations in the second half of the year.

Peter R. Poillon: We also continue to make progress advancing our long term strategy of building World class credit card and auto finance businesses.

Douglas H. Shulman: Capital generation was $136 million this quarter, affected by the Foresight Acquisition, which closed in April, and Jenny will discuss in a few minutes. Our receivables grew 11% year-over-year, driven by this acquisition of Foresight, as well as our expanded product offering. Total revenue grew 7% year over year.

Jenny: Capital generation was $136 million this quarter affected by the <unk> acquisition, which closed in April and Jenny will discuss in a few minutes.

Jenny: Our receivables grew 11% year over year, driven by this acquisition of foresight as well as our expanded product offerings.

Jenny: Total revenue grew 7% year over year.

Douglas H. Shulman: Even with continued tight underwriting standards, we've started to drive improvement in origination trends, and the competitive environment is quite constructive for us right now, supporting our ability to increase pricing where appropriate. We also continue to use data science and product innovation to find profitable pockets of growth. We now see a path to $24.5 billion of receivables by year end, up from our original expectation of $24 billion. But I do want to emphasize again that we remain quite conservative in our underwriting process.

Jenny: Even with continued tight underwriting standards, we have started to drive improvement in origination trends.

Speaker Change: And the competitive environment is quite constructive for US right now supporting our ability to increase pricing where appropriate. We also continue to use data science and product innovation to find profitable pockets of growth. We now see a path to $24 5 billion.

Speaker Change: Of receivables by year end up from our original expectation of 24 billion, but I do want to emphasize again that we remain quite conservative in our underwriting posture.

Douglas H. Shulman: Let me spend a moment discussing the health of the mortgage market. Before I do so, let me remind you that while we monitor overall, we lend customer by customer, based on their individual credit risk, taking into consideration geography, net disposable income, our proprietary data on current and former customers, and hundreds of other variables. I've talked in the past about the cross currents our customers face. On the positive side, from the macroeconomic data we've seen, the labor markets remain resilient, and cumulative wage growth has caught up with cumulative inflation as compared to 2019.

Peter R. Poillon: Let me spend a moment discussing the health of the consumer.

Peter R. Poillon: Before I do so let me remind you that while we monitor overall trends, we lend customer by customer based on their individual credit risk taking into consideration geography net disposable income our proprietary data on current and former customers.

Peter R. Poillon: And hundreds of other variables.

Peter R. Poillon: I've talked in the past about the cross currents are customer space on the positive side from the macroeconomic data we've seen the labor markets remain resilient and cumulative wage growth has caught up with cumulative inflation as compared to 2019.

Douglas H. Shulman: This holds true with our customer base as well. For the customers we are bringing into our business today, wages have caught up with everyday expenses, and they have a higher net disposable income than they did pre-pandemic. However, many of our non-prime customers are still stressed about the cumulative effect of higher costs, particularly food, housing, and transportation.

Peter R. Poillon: This holds true with our customer base as well and for the customers. We are bringing into our business today wages have caught up with everyday expenses and they have a higher net disposable income than they did pre pandemic.

Peter R. Poillon: However, many of our non prime customers are still stressed about the cumulative effect of higher costs, particularly food housing and transportation.

Douglas H. Shulman: Our approach remains consistent, to provide non-prime customers responsible access to credit but to do so with a disciplined approach to underwriting. This allows us to continually serve this customer regardless of the macroeconomic environment. Looking at trends, our 30 to 89 day delinquency was 2.97%, down 31 basis points from the end of last year and in line with the normal seasonal pattern. However, adjusting for the continued growth dynamic headwinds that Jenny will discuss, our delinquency trends are better than normal seasonal paths. Loan net charge-offs were 8.3% in the quarter, consistent with our expectations.

Peter R. Poillon: Our approach remains consistent to provide non prime customers responsible access to credit but to do so with a disciplined approach to underwriting.

Peter R. Poillon: This allows us to continually serve this customer regardless of the macroeconomic environment.

Peter R. Poillon: Looking at trends, our 30 to 89 day delinquency was 297% down 31 basis points from the end of last year and in line with normal seasonal patterns.

journey: Adjusting for the continued growth dynamic headwinds that journey will discuss our delinquency trends are better than normal seasonal patterns.

Peter R. Poillon: Loan net charge offs were eight 3% in the quarter consistent with our expectations.

Douglas H. Shulman: We continue to feel very good about our newer vintages, which are performing in line with expectations. The front book now comprises about 75% of our receivables. And as that portion of our portfolio continues to grow, we expect our overall portfolio performance to improve. Our operating expense ratio in the second quarter was 6.4 percent, benefiting from our focus on disciplined expense management, as well as the operating leverage of our business, which was enhanced with the acquisition of Forsa.

Peter R. Poillon: We continue to feel very good about our newer vintages, which are performing in line with expectations. The front book now comprises about 75% of our receivables and as that portion of our portfolio continues to grow we expect our overall portfolio performance.

Peter R. Poillon: To improve.

Peter R. Poillon: Our operating expense ratio in the second quarter was six 4% benefiting from our focus on disciplined expense management as well as the operating leverage of our business, which was enhanced with the acquisition of foresight.

Douglas H. Shulman: We continue to demonstrate conservative management of our balance sheet and the strength of our capital markets access. This quarter, we raised $1.9 billion in secured and unsecured financing. We will use some of the proceeds to redeem our unsecured debt coming due in 2025. And our next unsecured debt maturity is not due until March 2025. Our balance sheet, with staggered maturities, a diversified funding program, and a long liquidity runway, continues to be a core strength of our business and a competitive differentiator.

Peter R. Poillon: We continue to demonstrate conservative management of our balance sheet and the strength of our capital markets access this quarter, we raised $1.9 billion of secured and unsecured debt we.

Peter R. Poillon: We used some of the proceeds to redeem our unsecured debt coming due in 2025 and our next unsecured debt maturity is not due until March 2026.

Peter R. Poillon: Our balance sheet with staggered maturities diversified funding program and a long liquidity runway continues to be a core strength of our business and a competitive differentiator.

Douglas H. Shulman: Let me now discuss our credit card and auto finance projects, both of which leverage our key competitive advantages and open up very large non-prime markets. During the quarter, we served 3.2 million total customers, up 19% from a year ago.

Peter R. Poillon: Let me now discuss our credit card and auto finance products, both of which leverage our key competitive advantages and open up very large non prime markets for us.

Peter R. Poillon: During the quarter. We served three 2 million total customers up 19% from a year ago much of that growth is attributable to these new products are.

Douglas H. Shulman: Much of that growth is attributable to these new projects. Our auto finance receivables were $2.2 billion at quarter end, including $1.3 billion of receivables from force. Credit performance in the auto business is in line with our expectations and better than comparable industry performance. The integration of Foresight is going very well.

Peter R. Poillon: Our auto finance receivables were $2 $2 billion at quarter end, including $1 $3 billion of receivables from foresight.

Peter R. Poillon: Credit performance in the auto business is in line with our expectations and better than comparable industry performance.

Peter R. Poillon: The integration of foresight is going very well, we put together our organically grown auto finance business and foresight into a single Onemain Auto finance organization.

Douglas H. Shulman: We put together our organically grown auto finance business and Foresight into a single OneMain auto finance organization. This structure ensures that we have consistent go-to-market strategies across the entire. We remain excited about all of the strategic benefits of the acquisition, including an experienced leadership team, great technology, and a franchise dealer network. We now have a scalable auto finance platform with access to a large network of both independent and franchise auto dealers and are very well positioned to expand this business in a disciplined manner. In our credit card business, we added more than 100,000 accounts and $80 million in receivables during the quarter. And as of June 30, we had over 600,000 and $466 million in receivables.

Peter R. Poillon: This structure ensures that we have consistent go to market strategies across the entire business.

Peter R. Poillon: We remain excited about all of the strategic benefits of the acquisition, including an experienced leadership team great technology and a franchise dealer network. We now have a scalable auto finance platform with access to a large network of both.

Peter R. Poillon: Independent and franchise auto dealers and are very well positioned to expand this business in a disciplined manner.

Peter R. Poillon: In our credit card business, we added more than 100000 accounts and $80 million in receivables in the quarter and as of June 30, we had over 600000 accounts and $466 million of receivables.

Douglas H. Shulman: We feel great about the key metrics of our card bill, and the Brightway mobile app and product features that reward customers for on-time payments continue to resonate well with our target customers. While we're maintaining a tight credit posture in cards, similar to our other products, we continue to develop the business to position us for future expansion. We remain quite confident that both our credit card and auto finance businesses will be significant drivers of profitable growth in the years ahead.

Peter R. Poillon: We feel great about the key metrics of our card business.

Peter R. Poillon: And the bright weighed mobile app and product features that reward customers for on time payments continue to resonate well with our target customers.

Peter R. Poillon: While we are maintaining a tight credit posture in cards similar to our other products. We continue to develop the business to position us for future expansion.

Peter R. Poillon: We remain quite confident that both our credit card and auto finance businesses will be significant drivers of profitable growth in the years ahead.

Douglas H. Shulman: Let me briefly touch on capital allocation. Our top priority is to invest in the business to position us for ongoing growth. We continue to lend to every customer that meets our disciplined underwriting standards and return hurdles.

Peter R. Poillon: Let me briefly touch on capital allocation.

Peter R. Poillon: Our top priority is to invest in the business to position us for ongoing success. We continue to lend to every customer that meets our disciplined underwriting standards and return hurdles and also continue to invest in new products and channels data science technology.

Douglas H. Shulman: And we will also continue to invest in new products and channels, data science, technology, and digital capabilities that improve the customer experience and further advance our competitive position. Additionally, this quarter, we allocated some capital to the tuck-in acquisition of forces. As I mentioned earlier, this gives us the platform to continue to expand into the $600 billion non-prime auto finance market. We are also committed to a strong regular dividend, which is now $4.16 per share on an annual basis, delivering a healthy 8% yield at today's price. Share repurchases in the second quarter were about 150,000 shares for approximately $8 million. With that, I will turn the call over to you. Thanks, Doug, and good morning, everyone.

Peter R. Poillon: In digital capabilities that improve the customer experience and further advance our competitive positioning. Additionally, this quarter, we allocated some capital to the tuck in acquisition of foresight as I mentioned earlier. This gives us the platform to continue to expand.

Peter R. Poillon: And into the 600 billion dollar non prime auto finance market.

Peter R. Poillon: We are also committed to a strong regular dividend, which is now $4 16 per share on an annual basis, delivering a healthy 8% yield at today's price.

Peter R. Poillon: Share repurchases in the second quarter were about 150000 shares for approximately $8 million with that let me turn the call over to Jenny.

Jenny: Thanks, Doug and good morning, everyone.

Jenny Osterhout: Our second quarter was highlighted by continued revenue growth, good credit performance, continued expense discipline, well-executed funding, and excellent progress on the acquisition and integration of Foresight, furthering our long-term objectives and multiproduct strategy. Second quarter net income was $71 million, or $0.59 per diluted share, down from $0.85 per diluted share in the second quarter of 2023. The current quarter gap results included purchase accounting adjustments associated with the acquisition of Foresight, which are excluded from our C&I adjusted results.

Jenny: Our second quarter was highlighted by continued revenue growth. Good credit performance continued expense discipline, well executed funding and excellent progress on the acquisition and integration of foresight, furthering our long term objectives and multi product strategy.

Speaker Change: Second quarter GAAP net income was $71 million or <unk> 59 per diluted share down from 85 cents per diluted share in the second quarter of 2023.

Speaker Change: The current quarter GAAP results included purchase accounting adjustments associated with the acquisition of foresight, which are excluded from our C&I adjusted results.

Jenny Osterhout: CNI's adjusted net income was $1.02 per diluted share, up 1% from the second quarter of 2023. With the acquisition of Foresight this quarter, we aligned our policies related to certain secured loans to ensure consistency and timing of loss recognition. This had no impact on our earnings.

Jenny: Adjusted net income was $1 <unk> per diluted share up 1% from the second quarter of 2023.

Peter R. Poillon: With the acquisition of foresight this quarter, we aligned our policies related to certain secured loans to ensure consistency and timing of loss recognition. This had no impact on our earnings it simply accelerated losses under the secured loans with an equal offsetting reserve release it.

Jenny Osterhout: It simply accelerated losses on those secured loans with an equal offsetting reserve release. It did, however, impact capital generation this quarter by $22 million. As a reminder, capital generation does include our loan losses but does not include changes in reserves. The resulting capital generation this quarter was $136 million, which compares to $155 million in the first quarter.

Peter R. Poillon: It did however impact capital generation this quarter by $22 million as a reminder, capital generation does include our loan losses, but does not include changes in reserves, the resulting capital generation this quarter was $136 million, which compares to $155 million in.

Peter R. Poillon: The first quarter, we won't see this impact in future quarters.

Jenny Osterhout: We won't see this impact in future quarters. Managed receivables this quarter were $23.7 billion, up $2.3 billion, or 11% from a year ago. Excluding the receivables acquired with Foresight on April 1st, managed receivables grew by 5% in the quarter as compared to last year. Second quarter originations of $3.6 billion were down 4% year over year.

Peter R. Poillon: Managed receivables this quarter were $23 $7 billion up to $3 billion or 11% from a year ago. Excluding the receivables acquired with foresight on April 1st managed receivables grew by 5% in the quarter as compared to last year.

Peter R. Poillon: Second quarter originations of $3 $6 billion were down 4% year over year.

Jenny Osterhout: As Doug said, we have maintained our conservative underwriting as we continue to closely monitor the macroeconomic environment. However, this quarter, we were able to take advantage of favorable market conditions and find pockets of growth to improve our originations trajectory as the quarter progressed. We utilize new data sources and tools to expand in certain segments, improve our offers, and improve growth and origination. As a result, our new originations accelerated throughout the quarter, and we now expect originations to increase in the second half of 2024 and push managed receivables closer to $24.5 billion by year-end.

Peter R. Poillon: As Doug said, we have maintained our conservative underwriting as we continue to closely monitor the macroeconomic environment. However, this quarter, we were able to take advantage of favorable market conditions and find pockets of growth to improve our origination trajectory as the quarter progressed.

Douglas H. Shulman: We utilized new data sources and tools to expand in certain segments improve our offers and improved growth in origination as a result, our new originations accelerated throughout the quarter and we now expect originations to increase in the second half of 'twenty 'twenty, four and pushed managed receivables closer to $24 5 billion.

Peter R. Poillon: By year end.

Jenny Osterhout: It is also worth noting that given the constructive competitive environment, as we've discussed in the past, we've been focused on improving pricing where appropriate. The average APR on consumer loan originations, excluding foresight, has increased by around 100 basis points from a year ago.

Peter R. Poillon: It is also worth noting that given the constructive competitive environment as we've discussed in the past we've been focused on improving pricing where appropriate the average APR on consumer loan originations. Excluding foresight has increased by around 100 basis points from a year ago.

Jenny Osterhout: Total revenue was $1.4 billion, up 7% compared to second quarter 2023, in line with our full-year growth guidance of 6 to 8%. Interest income was $1.2 billion, up 9% year over year, driven by higher average receivables, including the impact from the acquisition of Foresight, offset by a modest reduction in yield. Consumer loan yield in the second quarter was 21.9%. Excluding the impact of foresight, our yield would have been 22.4%, which is up about 25 basis points from last quarter.

Peter R. Poillon: Total revenue was $1 4 billion up 7% compared to second quarter 2023 in line with our full year growth guidance of 6% to 8%.

Peter R. Poillon: Interest income was $1 $2 billion up 9% year over year, driven by higher average receivables, including the impact from the acquisition of foresight offset by a modest reduction in yield.

Peter R. Poillon: Consumer loan yield in the second quarter was 21, 9%.

Peter R. Poillon: Excluding the impact of foresight, our yield would have been 22, 4%, which is up about 25 basis points from last quarter.

Jenny Osterhout: So we are clearly seeing the accretive impact of our pricing actions on our loan book, as well as the stability in our credit performance. Other revenue was $184 million, up 1% from the prior year, primarily driven by healthy growth in investment income. Interest expense for the quarter was $295 million, up $53 million versus the prior year, driven by an increase in average debt to support our receivables growth and a modestly higher cost of funds.

Peter R. Poillon: So we are clearly seeing the accretive impact of our pricing actions on our loan book as well as the stability in our credit performance.

Peter R. Poillon: Other revenue was $184 million up 1% from the prior year, primarily driven by healthy growth in investment income.

Peter R. Poillon: Interest expense for the quarter with $295 million.

Peter R. Poillon: Up $53 million versus the prior year, driven by an increase in average debt to support our receivables growth and modestly higher cost of funds.

Jenny Osterhout: Interest expense as a percent of receivables in the quarter was 5.4% and continues to be impacted by our excess cash balance. This was the result of our proactive management of the balance sheet as we raised $1.9 billion of debt during the quarter at attractive rates and used a portion of those proceeds to fully redeem our March 2025 bond late in the quarter. Excluding the impact of the excess cash, our interest expense would have been 5.1%.

Peter R. Poillon: Interest expense as a percent of receivables in the quarter was five 4% and continues to be impacted by our excess cash balances.

Peter R. Poillon: This was the result of our proactive management of the balance sheet as we raised $1 $9 billion of debt during the quarter at attractive coupons and used a portion of those proceeds to fully redeem our March 2025 bond late in the quarter.

Peter R. Poillon: Excluding the impact of the excess cash or interest expense would have been five 1%.

Jenny Osterhout: It is also worth noting that we have a healthy coupon on our cash in the current environment. Looking forward, we continue to expect full-year interest expense of approximately 5.2%. Provision expense was $515 million, comprising net charge-offs of $496 million and a $19 million increase to our allowance, driven almost entirely by the organic increase in receivables during the quarter. I'll further discuss delinquency and loss provisioning in a few moments. Policyholder benefits and claims expense for the quarter was $47 million, compared to $44 million in the second quarter of 2023.

Peter R. Poillon: It is also worth noting that we have a healthy coupon on our cash in the current environment.

Peter R. Poillon: Looking forward, we continue to expect full year interest expense of approximately five 2%.

Peter R. Poillon: Provision expense was $515 million, comprising net charge offs of $496 million and a $19 million increase to our allowance driven almost entirely by the organic increase in receivables during the quarter.

Peter R. Poillon: I'll further discuss delinquency and loss provisioning in a few moments.

Speaker Change: Policyholder benefits and claims expense for the quarter was $47 million compared to $44 million in second quarter 2023, we remain comfortable with our previously stated expectation of approximately $50 million each quarter.

Jenny Osterhout: We remain comfortable with our previously stated expectation of approximately $50 million in each quarter. Let's turn to slide 8 and look at consumer loan delinquency trends. Our 30-89 day delinquency on June 30th, excluding foresight, was 2.97%, which is 31 basis points, down since the end of last year in line with pre-pandemic seasonal patterns. If you adjust for the slower pace of growth in our book from our conservative credit box, our year-to-date 30- to 89-day delinquency trends would be approximately 25 percent better than pre-pandemic seasonal patterns in the first half of the year.

Peter R. Poillon: Let's turn to slide eight and look at consumer loan delinquency trends.

Peter R. Poillon: Our 30 to 89 day delinquency on June 30th excluding foresight was 297%, which is 31 basis points.

Peter R. Poillon: Down since the end of last year in line with pre pandemic seasonal pattern. If you adjust for the slower pace of growth in our book from our Conservative credit box our year to date 30 to 89 day delinquency trends would be approximately 25% better than pre pandemic seasonal patterns in the first half of the year.

Peter R. Poillon: You can see this in the chart on slide nine.

Jenny Osterhout: You can see this in the chart on slide 9. So while the year-to-date results look steady, we feel good because there are underlying improvements in the performance of our book that are masked by this growth effect. Front book vintages, which we define as origination starting as of August 2022, now comprise 76% of total receivables, as compared to 71% a quarter ago. We remain pleased with the performance of the loans we are booking today. And the performance of the front book remains in line with expectations.

Peter R. Poillon: So while the year to date results look steady we feel good because there are underlying improvements in the performance of our book that are masked by this growth effect.

Peter R. Poillon: Front book Vinci, It is which we define as origination starting as of August 2022, now comprised 76% of total receivables as compared to 71% a quarter ago. We remain pleased with the performance of the loans, we are booking today and the performance of the front book remains in line with <unk>.

Peter R. Poillon: Expectations.

Jenny Osterhout: And it is worth noting that while the back book only represents about a quarter of the total portfolio, it still contains 43% of our 30-plus delinquencies. We are confident that as the back book runs down, there will be further improvement in our delinquency and loss metrics. Let's now turn to the CNI net charge-off trends shown on slide 10. The net charge-off rate for consumer loans was 8.3% of average net receivables in the second quarter.

Peter R. Poillon: And it is worth noting that while the back book only represents about a quarter of the total portfolio. It's still contains 43% of our 30 plus delinquencies were confident that as the back book runs down there will be further improvement in our delinquency and loss metrics.

Peter R. Poillon: Let's now turn to the C&I net charge off trends shown on slide 10.

Peter R. Poillon: The net charge off rate for consumer loans was eight 3% of average net receivables in the second quarter down.

Jenny Osterhout: Down seasonally from the first quarter and in line with our expectations and looking to the second half of the year, we expect continued seasonal patterns for net charge-off. However, recoveries remain strong in the quarter, amounting to $75 million, or 1.4% of receivables, as we remain opportunistic with our recovery strategy. Our loan loss reserve trends are shown on slide 11. Loan Loss Reserves ended the quarter at $2.6 billion.

Peter R. Poillon: Down seasonally from the first quarter and in line with our expectations and looking to the second half of the year. We expect continued seasonal patterns for net charge offs were.

Peter R. Poillon: Recoveries remained strong in the quarter amounting to $75 million or one 4% of receivables as we remain opportunistic with our recovery strategy.

Peter R. Poillon: Our loan loss reserve trends are shown on slide 11 loan loss reserves ended the quarter at $2 $6 billion, our reserves increased by $117 million 98 million of which were associated with the acquisition of foresight.

Jenny Osterhout: Our reserves increased by $117 million, 98 million of which were associated with the acquisition of Foresight. The acquisition also impacted our reserve coverage. Our loan loss reserve ratio was 11.5% on June 30th, slightly down from 11.6% a quarter ago. However, our reserve coverage of our legacy portfolio remains the same. And given the current macroeconomic environment, we're comfortable with this level of reserves. Now, let's turn to slide 12.

Peter R. Poillon: The acquisition also impacted our reserve coverage our loan loss reserve ratio was 11, 5% on June 30th slightly down from 11, 6% a quarter ago.

Peter R. Poillon: Our reserve coverage of our legacy portfolio remains the same and given the current macroeconomic environment, we're comfortable with this level of reserves.

Jenny Osterhout: Operating expenses were $374 million in the quarter, up 1% year over year, driven by the addition of the Foresight expense base in the quarter and our continued investment for future growth, with some offset from our expense initiatives discussed last quarter. Our operating expense ratio in the quarter improved to 6.4% from 6.6% last quarter, benefiting from the inherent operating leverage from the acquisition of Foresight as well as our continued expense management discipline.

Peter R. Poillon: Now, let's turn to slide 12, operating expenses were $374 million in the quarter up 1% year over year driven by the addition of the foresight expense base in the quarter and our continued investment for future growth with some offset from our expense initiatives discussed last quarter.

Peter R. Poillon: Our operating expense ratio in the quarter improved to six 4% from six 6% last quarter benefitting from the inherent operating leverage from the acquisition of foresight as well as our continued expense management discipline.

Jenny Osterhout: We expect to continue to invest for current and future growth in our new products, technology, and data through the remainder of the year and are on track for the full year operating expense ratio guidance of approximately 6.7%. Now, let's turn to funding and our balance sheet on slide 13. During the second quarter, we raised $1.9 billion, comprising a $1.1 billion seven-year revolving securitization priced at a blended rate of 5.99% issued in April and a $750 million seven-year unsecured bond at 7.5% issued in May.

Peter R. Poillon: We expect to continue to invest for current and future growth in our new products technology and data through the remainder of the year and are on track for the full year operating expense ratio guidance of approximately six 7%.

Jenny Osterhout: The unsecured offering was one of our strongest executions to date with significant demand and included more than a dozen new investors in our paper. As I mentioned earlier, we utilized a portion of the funds from our issuances to redeem the remaining $1.1 billion of our March 2025 unsecured bonds. This has significantly extended the maturity profile of our debt stack, and we now have no unsecured maturities until March 2026. Supporting us even further is funding flexibility over the remainder of this year and next. Wrapping up the balance sheet, our net leverage at the end of the second quarter was 5.8 times, which is within our 4 to 6 times leverage range, impacted primarily by the Foresight Acquisition.

Peter R. Poillon: Now, let's turn to funding and our balance sheet on slide 13.

Peter R. Poillon: During the second quarter, we raised $1 9 billion, comprising a $1 $1 billion seven year revolving securitization priced at a blended rate of $5, 99% issued in April and a $750 million seven year unsecured bond at seven 5% issued in May.

Peter R. Poillon: Unsecured offering was one of our strongest execution to date with significant demand and included more than a dozen new investors in our paper.

Peter R. Poillon: As I mentioned earlier, we utilized a portion of the funds from our issuances to redeem the remaining $1 1 billion of our March 2025 unsecured bonds. This has significantly extended the maturity profile of our debt stack and we now have no unsecured maturities until March 2026, affording us.

Peter R. Poillon: Further funding flexibility over the remainder of this year and next.

Peter R. Poillon: Wrapping up the balance sheet, our net leverage at the end of the second quarter was five eight times, which is within our 4% to six times leverage range impacted primarily by the foresight acquisition.

Jenny Osterhout: Turning briefly to slide 15, our 2024 priorities, we continue to feel good about the priorities we laid out at the beginning of this year. As I said earlier, we now expect to end the year with managed receivables of approximately $24.5 billion, which includes about $1.3 billion from Foresight, as well as growth and originations in the back half of the year. We maintain our guidance of 6-8% revenue growth for the year. Interest expense is expected to land at approximately 5.2% for the year, and we expect our full-year net charge-offs will be in our 7.7-8.3% guidance range. Finally, we maintain our operating expense ratio guidance for the year at around 6.7%. I'll leave off with how I started.

Peter R. Poillon: Turning briefly to slide 15, our 2024 priorities, we continue to feel good about the priorities we laid out at the beginning of this year.

Peter R. Poillon: As I said earlier, we now expect to end the year with managed receivables of approximately $24 $5 billion, which includes about $1 $3 billion from foresight as well as growth in originations in the back half of the year.

Peter R. Poillon: We maintain our guidance of 6% to 8% revenue growth for the year interest expense is expected to land at approximately five 2% for the year and we expect our full year net charge offs will be in our seven 7% to eight 3% guidance range.

Peter R. Poillon: Finally, we maintain our operating expense ratio guidance for the year at around six 7%.

Jenny Osterhout: We're pleased with the quarter and are tracking to our full year 2024 strategic priorities. Importantly, we are also making excellent progress on key strategic initiatives focused on expanding products and capabilities that position us well for the future. With that, I'll turn the call back over to Doug. Thanks, Jenny.

Speaker Change: I'll leave off with how I started we're pleased with the quarter and are tracking to our full year 2024 strategic priorities. Importantly, we are also making excellent progress on key strategic initiatives focused on expanding products and capabilities that position us well for the future with that let me turn the call.

Douglas H. Shulman: Back over to Doug.

Douglas H. Shulman: Thanks Jenny.

Douglas H. Shulman: I'm very pleased with the results for the first half of 2024. The positive direction of our credit performance, improved pace of originations, and the continued progress in our credit card and auto finance businesses have positioned the company quite well for the second half of the year and beyond. We remain laser-focused on our customers and growing our relationship with them as we build on OneMain's position as the lender of choice to the non-prime.

Douglas H. Shulman: I'm very pleased with the results from the first half of 2024.

Douglas H. Shulman: The positive direction of our credit performance improved pace of originations and the continued progress in our credit card and auto finance businesses have positioned the company quite well for the second half of the year and beyond.

Douglas H. Shulman: We remain laser focused on our customers and growing our relationship with them as we build on <unk> position as the lender of choice to the non prime consumer.

Douglas H. Shulman: I'm also pleased that in June, for the third year in a row, OneMain was named a Most Loved Workplace by the Best Practice Institute. This honor is based on feedback from team members across the company about OneMain's great culture.

Douglas H. Shulman: I'm also pleased that in June for the third year in a row Onemain was named as the most loved workplace by the best practice Institute.

Douglas H. Shulman: This honor is based on feedback from team members across the company about one means great culture, I'm extremely proud and thankful to work with such a talented group of people across the United States and want to extend my heartfelt. Thank you to our team members.

Douglas H. Shulman: I'm extremely proud and thankful to work with such a talented group of people across the United States and want to extend my heartfelt thank you to our team members for their continued commitment to excellence as they support each other and serve our customers. With that, I'll open it up to questions. Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your touchtone phone. If at any point your question is answered, you may remove yourself from the queue by pressing star 2.

Douglas H. Shulman: For their continued commitment to excellence as they support each other and serve our customers with that let me open it up to questions.

Speaker Change: Thank you the floor is now open for questions. At this time, if you have a question or comment. Please press star one on your Touchtone phone.

Speaker Change: If at any point. Your question is answered you may remove yourself from the queue by pressing star Kale.

Operator: Again, we ask that while you pose your question, you pick up your handset to provide optimal sound quality. Our first question will come from Terry Ma with Barclays. Please go ahead. Hey, thanks. Good morning.

Douglas H. Shulman: Again, we ask that while you pose your question that you pick up your handset to provide optimal sound quality.

Terry Ma: Our first question will come from Terry miles with Barclays. Please go ahead.

Terry Ma: I think, Hey, thanks. I think you indicated in your prepared remarks that there was a policy adjustment for foresight in the quarter. It looks like it impacted the charge-off ratio, which you reported as 8.29%. But based on the dollar charge-off, I'm getting something higher. So maybe just walk us through what the adjustment was, why you made it, and what's the right charge-off metric for investors. Hi Terry. It's Jenny.

Terry Ma: Hey, Thanks, good morning.

David: Thanks, David.

Terry Ma: I think you indicated in your prepared remarks that there was a policy adjustments of fore sight in the quarter. It looks like it impacted the charge off ratio, which you reported as 8% to 9%, but based on the dollar charge offs I'm getting something higher so maybe just walk us through what the adjustment was why you made it and what's the.

Speaker Change: Charge offs metric for investors the investors to focus on.

Jenny Osterhout: Thanks for the question. Let me start with why we did it, and then I can talk through a little bit about what it means. So we acquired Foresight, and when we did that, we aligned our practices, which is pretty common when you do an acquisition. This brought forward the timing of loss recognition for certain loans that we have secured by an auto. I said this earlier, but there are some really important points to keep in mind.

Terry Ma: Hi, Terry it's Jenny thanks.

Jenny: Thanks for the question, let me start with why we did it and I can walk through a little bit about what it means.

Speaker Change: So we acquired foresight and when we did that we aligned our practices, which is pretty common.

Douglas H. Shulman: When you do an acquisition. This brought forward the timing of lock loss recognition for certain loans that we have secured by an auto.

Douglas H. Shulman: And I said this earlier, but there are some really important points to keep in mind that the net charge off increase was offset by an equal amount of reserve release. So there was no impact to net income.

Jenny Osterhout: The net charge-off increase was offset by an equal amount of reserve release, so there was no impact on net income. However, there was an impact on capital generation because CapGen does include losses but does not include changes to reserves.

Speaker Change: There was impact of capital generation because cap. Gen does include losses, but does not include changes to reserves that impact was $22 million to cap Gen and thats, an after tax impact and remember we have a 25% tax rate. So it's a 29.

Jenny Osterhout: That impact was $22 million for CapGen, and that's an after-tax impact. And remember, we have a 25% tax rate, so it's a $29 million impact on losses and an equal $29 million release on reserves. And that increase will not repeat in future quarters, so you shouldn't include it for your annualized loss rate. Got it.

Douglas H. Shulman: Million dollar impact on losses, and an equal $29 million release on reserves and that increase will not repeat in future quarters. So you shouldnt include it for your annualized loss rate.

Speaker Change: Got it.

Speaker Change: That's helpful. And then I have a follow up just on the delinquency trends and you mentioned 30 to 89 days delinquencies.

Terry Ma: That's helpful. And then I have a follow-up just on the delinquency trends. You mentioned, you know, 30 to 89 delinquencies, an ex-forsyte of 2.97%, which was better than seasonal. But I guess in terms of year-over-year increase, it's still..., and I think the magnitude actually is greater in the last. So maybe just talk about your confidence in the credit outlook and maybe peak charge-offs this year. And, I guess, do we need to see that 30-to-89-day delinquency metric start decreasing year-over-year in the back half to get maybe lower charge-off trends next year? Okay, let me take that in pieces. Terry, this is Jenny again.

Speaker Change: Delinquencies ex foresight.

Speaker Change: 297%, which was better than seasonal trends.

Speaker Change: But I guess in terms of year over year increase it's still increasing and I think the magnitude.

Speaker Change: <unk> is greater than last quarter. So maybe just talk about your confidence in the credit outlook and maybe peak charge offs. This year and I guess do we need to see that 30 to 89 day delinquency metrics to start decreasing year over year in the back half to get maybe lower charge offs trends next year.

Speaker Change: Thanks.

Speaker Change: Okay. Let me, let me take that in a few pieces Terry This is Jeremy again.

Jenny Osterhout: First, let me take on peak losses. Really, our view hasn't changed since the first quarter. We're confident that losses are going to go down for the rest of the year, and sitting here today, we like the trajectory of our credit performance. In terms of our guide for the annualized loss rate, you know, our 7.7 to 8.3 guide we maintained, and you should expect that for the full year. So we're feeling good about our guide and good about the trajectory for the rest of the year. Unknown Attendee, I got it.

Jeremy: First let me take on on peak losses, really our view hasn't changed since the first quarter I'm more confident in la.

Speaker Change: Losses are going to go down for the rest of the years year and sitting here today, we like the trajectory of our credit performance in terms of our guide for the annualized loss rate you know our seven seven to eight three guide we maintained.

Speaker Change: And you should expect that for the full year. So we're feeling we're feeling good about our guide and good about the trajectory for the rest of the year.

Unknown Attendee: And What about the Outlook Past? You know, we don't we don't provide guidance beyond 2024, but, Okay, great, thank you. We'll take our next question from Moshe Orenbuch with T.D. Cowan.

Speaker Change: Got it and what would a up the outlook past 2024.

Speaker Change: We don't we don't provide guidance beyond 2024.

Speaker Change: But.

Speaker Change: Okay.

Speaker Change: Thank you.

Moshe Ari Orenbuch: Please go ahead. Great, thanks. Douglas Caintic, John Rowan, Moshe Orenbuch, Kenneth Lee, Kevin Barker, Arren Cyganovich, Douglas Shulman, Micah Conrad, Richard Shane, David Scharf, Michael Kaye, Peter Poillon, OneMain Holdings Inc. Yeah, thanks, Moshe. A couple things. One, as you mentioned, we slightly increased our guidance of what we thought our ending net receivables would be. And near the end of the second quarter, we saw an uptick in origination. I want to put it in perspective, though.

Speaker Change: We will take our next question from Moshe Orenbuch with TD Cowen. Please go ahead.

Moshe Ari Orenbuch: Great. Thanks.

Speaker Change: You do a check in China, you talked about seeing.

Speaker Change: We're expecting better growth.

Moshe Ari Orenbuch: And resumption of that in the second half could you talk a little bit more in detail about what you're seeing whether it's the competitive environment you know just.

Speaker Change: A little more fleshing out of what you're seeing both from your borrowers on the competitive environment that kind of led you to that.

Speaker Change: To that point.

Moshe: Yeah. Thanks Moshe.

Speaker Change: A couple of things one as you mentioned, we slightly increased our guidance of what we thought.

Speaker Change: Our ending net receivables would be.

Speaker Change: And near the end of the second quarter, we saw an uptick in originations I wanted to put it in perspective, though.

Douglas H. Shulman: First quarter, we were, our originations were 10% below the first quarter of 2023. This quarter, we were 4% below 2023. So while we've seen an uptick in originations and then seen, you know, some light with growth, and the trajectory is positive, we still have a very tight credit box. We still have higher pricing where we like the trade of a little bit lower volume, but more profitability. So I just want to make sure it's, you know, it's tempered.

Moshe: First quarter, we were.

Moshe: Our originations were 10% below first quarter of 2023. This quarter, we were 4% below 2023, so while we've seen an uptick in originations and then seen some light with growth and the trajectory is positive we still have a.

Speaker Change: Very tight credit box.

Speaker Change: We still have had higher pricing, where we like the trade of a little bit lower volume, but more profitability. So I just wanted to make sure. It's.

Speaker Change: It's tempered I think from a <unk>.

Speaker Change: Competitive environment, it's very constructive for US right now I mean as Jenny mentioned.

Douglas H. Shulman: I think from a competitive environment, it's very constructive for us right now. I mean, as Jenny mentioned, we've increased, you know, average APR by 100 basis points or close to that over the last year. And we're still seeing a nice uptick in volume. You know, there are plenty of competitors in the market, but there are some competitors who have pulled back. Most banks, credit unions, and some of the digital competitors have moved to more prime and aren't participating as much with our customers. So, you know, that's very, you know, good for us. And then we actually have a suite of products now.

Speaker Change: We've increased.

Jenny: The average APR by 100 basis points or close to that over the last year.

Jenny: And we're still seeing a nice uptick in volume.

Speaker Change: Theres plenty of competitors in the market, but there are some competitors who have pulled back more.

Speaker Change: Most banks credit unions and some of the digital competitors.

Speaker Change: <unk> have moved to more prime and arent participating in as much with our customers. So.

Speaker Change: That's very.

Speaker Change: Good for US and then we actually have now a suite of products.

Douglas H. Shulman: You know, notably, even in our core loan product, given that we have a secured product, which gives us collateral and lower loss content, we can still be in the market making loans to people who have, you know, a lower credit profile but still will meet our 20% return hurdle. So, you know, in general, we still are very tight in the credit box. We're not increasing the risk we're taking on, but we're finding pockets of growth. And so, together with the pockets we're finding and the competitive environment, we feel very good. Got it. Thanks.

Speaker Change: Notably even in our core loan product.

Speaker Change: Given that we have a secured product, which gives us collateral and lower loss content, we can still be in the market, making loans to people who have.

Speaker Change: And at a lower.

Speaker Change: <unk> credit profile, but still meet our 20% return hurdle so.

Speaker Change: In general we still are very tight on the credit box.

Speaker Change: We're not increasing.

Speaker Change: The risk, we're taking on but we're finding pockets of growth and so together with the pockets, we're finding and the competitive environment, we feel very good about it.

Speaker Change: Got it thanks, and maybe as a follow up you talked a little bit about the integration of foresight with your core auto finance business, maybe if you could just flesh out a little bit as to how that is going to impact. Your your plans for growing the auto business at one day and you know over the course of the next year or two.

Douglas H. Shulman: Maybe as a follow-up, you talked a little bit about the integration of Foresight with your core auto finance business. Maybe if you could just flesh out a little bit as to how that, you know, is going to impact your plans for growing the auto business at OneMain over the course of the next year or so. Yeah, um, so, when we bought Foresight, there were several key factors, and I've talked about them before. One is that they've got a great team overall and a great executive team.

Speaker Change: Yes.

Speaker Change: So.

Speaker Change: When we bought four side.

Speaker Change: There were several key factors and I've talked about them before one is they've got to go.

Speaker Change: Great team overall, and a great executive team their CEO Mark Miller is now going to be our head of auto across Onemain.

Douglas H. Shulman: Their CEO, Mark Miller, is now going to be our head of auto across OneMain, our purchase money auto product. They've got a tech platform that we did a lot of diligence on. We like the architecture.

Speaker Change: Purchase money auto.

Speaker Change: Product.

Speaker Change: They've got a tech platform that we.

Speaker Change: So we did a lot of diligence on we like the architecture. We think is scalable and that will be the core of our auto.

Douglas H. Shulman: We think it's scalable, and that'll be the core of our auto tech platform. We have our traditional personal loan secured by an auto, where somebody's looking for a loan, and we buy out their car loan and make it a secured loan. So that's not a traditional car loan; that's a different product. But we've also built our own portfolio, which is close to $900 million in direct auto loans. We built an independent dealer network organically; we did not have a franchise dealer network, which is, you know, a different business.

Speaker Change: Tech platform.

Speaker Change: Our we have our traditional personal loans secured by an auto where somebody's looking for a loan.

Speaker Change: And we buy out their auto loan and make it a secured loan so that's not a traditional auto loan that's a different product, but we've also built.

Speaker Change: Our own portfolio, which is close to $900 million of.

Speaker Change: Direct auto loans, we built a independent dealer network organically, we did not have a franchise dealer network, which is.

Speaker Change: Different business and so what we've done is by buying four side, we added the franchise dealer network.

Douglas H. Shulman: And so what we've done is, by buying Foresight, we added the franchise dealer network. Now we're going to be able to work with both franchised and independent dealers, and you know, have a consolidated sales force across the US. We're putting our collections and collateral management teams together. There will be a unified auto credit team. I think in terms of growth, we are being deliberate. We are not chasing growth across any of our products right now.

Speaker Change: Now, we're going to be able to work with both franchise and independent dealers.

Speaker Change: Have a consolidated sales force across the U S. We're putting our collections and collateral management teams together there'll be a unified auto crew.

Speaker Change: Credit team.

Speaker Change: I think in terms of growth we are being deliberate we are not chasing growth across any of our products right now.

Douglas H. Shulman: You know, we have very tight credit boxes across personal loans, auto, and card. But as I've talked about before, Foresight gives us now a platform that, as we scale this business deliberately, we'll be able to build over time. You know, I imagine significant growth will happen once we feel that some of the macro uncertainty is cleared and things have fully turned around. We'll go next to Michael Kaye with Wells Fargo. Please go ahead.

Speaker Change: Very tight credit boxes.

Speaker Change: Cross personal loans auto and card, but as I've talked about before foresight gives us now.

Speaker Change: A platform that as we scale. This business deliberately we will be able to build it over time.

Speaker Change: I imagine the significant growth will happen once we feel that some of the macro uncertainty is cleared and things have turned foley.

Speaker Change: Yeah.

Speaker Change: We'll go next to Michael Kaye with Wells Fargo. Please go ahead.

Michael Robert Kaye: Hi, I was hoping.

Michael Robert Kaye: And you could talk about the trend going forward with with asset yields now at least for the second half of the year you mean, the lower yielding auto finance continues to grow in the mix, but you know there could be some offset from the higher personal loan apr's any sort of guidance on that.

Michael Robert Kaye: Hi, I was hoping you could talk about the trend going forward with asset yields, you know, at least for the second half of the year, you have the lower yielding auto finance continues to grow in the mix. But you know, there could be some offset from the higher personal loan APRs. Any sort of guidance on that? Uh, you heard me mention, hi, Michael, this is Jenny.

Speaker Change: You know.

Speaker Change: You heard me mentioned.

Speaker Change: Hi, Michael this is Jenny.

Jenny Osterhout: You heard me mention that, excluding foresight, our portfolio yield in the second quarter was 22.4. So that's up 25 basis points from the first quarter, and that's really from those pricing actions that we took in our personal loan book. And so with foresight, obviously, consumer loan yield went down modestly from the first quarter. And there are a number of things that are going into that. So one is those pricing actions we've discussed, which are about 100 basis points. And they're starting to take hold, but they're going to take full effect throughout the year.

Jenny: You heard me mentioned that excluding foresight.

Speaker Change: Our portfolio yield in the second quarter was 22, four so thats up 25 basis points from the first quarter and that's really from the pricing actions that we took in our personal loan book and so with foresight, obviously consumer loan yield went down modestly.

Speaker Change: Modestly from the first quarter.

Speaker Change: And there there are a number of things that are going into that.

Speaker Change: And so one is those pricing actions, we've discussed which are about 100 basis points.

Speaker Change: And they are starting to take hold but theyre going to take full effect throughout the year. So theres still some momentum on those and offsetting that in yield is the continuing impact of the current macro environment. So as that improves our yields will get better and then there's also the impact of <unk>.

Jenny Osterhout: So there's still some momentum on those, and offsetting that in yield is the continuing impact of the current macro environment. So as that improves, our yields will get better. And then there's also the impact of Foresight and our auto business, which is lower yielding but also has lower loss content. So we like that tradeoff. Obviously, we're choosing to make that tradeoff.

Speaker Change: Fore sight, and our auto business, which is lower lower yielding but also has lower loss content.

Speaker Change: So we like that trade off obviously, we're choosing to make that trade off.

Speaker Change: Like the lower loss volatility for a lower yield but.

Jenny Osterhout: We like the lower loss volatility for lower yield, but remember, we're guiding to that six to 8% revenue growth, which includes some of the card revenue in the quarter. And today, you know, as we sit here in this quarter, we were at 7%. So going forward, we'll also want to look at revenue and yield. And then, you know, you asked for the year, but over time, in a normalized environment, you can expect personal loans to come closer to 23% and 24% in terms of their yield, and auto loans should be in the 15% to 17% range.

Speaker Change: Remember, we're guiding to that 6% to 8% revenue growth, which includes some of the cards revenue in the quarter and today you know as we sit here in this quarter, we were at 7%. So going forward. We want to also look at revenue and yield and then you know you asked for the year, but over time in a normalized environment you can expect.

Speaker Change: Personal loans to come closer to 23, and 24% in terms of their yield and auto should be in the 15% to 17% range. So it really depends then on the product mix of that portfolio going forward and that sort of more of a long term trajectory in a normalized environment.

Jenny Osterhout: So it really depends then on the product mix of that portfolio going forward, and that's sort of more of a long-term trajectory in a normalized environment. I mean, could we expect as big of a quarter and quarter increase like you had in Q1x foresight in Q3? You know, I would think of it more like a flat in terms of what you would put for the go forward for the year. We'll go next to Rick Shane with J.P. Morgan.

Speaker Change: I mean could we expect like as big of a quarter over quarter increase like you had in Q1 that score side in Q3.

Speaker Change: You know I would think of it more like flat in.

Speaker Change: In terms of what you would put for the go forward for the year.

Speaker Change: Well go next to Rick Shane with J P. Morgan.

Richard Barry Shane: Thanks, everybody, for taking my questions. There are a lot of moving parts. Unknown Attendee, Micah Conrad, Douglas Shulman, Michael Kaye, Peter Poillon, Micah Conrad, John Hecht, Terry Ma, Dinesh Goyal, Jenny Osterhout, Mark DeVries, Jeannette Osterhout, Mark DeVries, Um, so we continue to see good customer payment behavior with early payoffs that are continuing to trend a little below our pre-pandemic levels So on an early pay perspective, those have come down from the early 2022 peak, but we think that this trend is, you know, really partially driven by this constructive environment that Doug spoke about earlier, as they're not refining and staying away from us and going to the competition. I got it.

Richard Barry Shane: Thanks, everybody for taking my question.

Speaker Change: Well look there are a lot of moving parts this quarter, but it looks to me like the repayment rate.

Speaker Change: On the core portfolio slowed down a little bit.

Richard Barry Shane: Is that correct and can you talk about the trends there and how much that is potentially contributing to the higher year end our loan growth expectations.

Speaker Change: Expectations.

Speaker Change: So we continue to see good customer payment behavior with early payoffs that are continuing to trend a little below our pre pandemic levels. So on an early pay perspective, those have come down from the early 2022 peak, but.

Douglas H. Shulman: We think that this trend is really partially driven by this constructive environment that Doug spoke about earlier as theyre, not theyre, not refining and staying away from us and going to the competition.

Jenny Osterhout: So you attribute this more to the stickiness of the loans not going away versus some change in individual payment behaviors or some factor that's driving it. Yeah, and I, you know, I think really, if we think about our customer payment behavior, I mean, I wouldn't I would not attribute it to a change in customer behavior and more to sort of the environment and access. We'll hear next from Mihir Bhatia with Bank of America. Hi, thanks for taking my question.

Speaker Change: Got it so you attribute this more to.

Speaker Change: Stickiness of the loans not going away versus some change in.

Speaker Change: Individual payment behaviors or songs factor, that's driving that.

Speaker Change: Yeah, and I I think really if we think about our customer payment behavior.

Speaker Change: I wouldn't I would not attribute it to a change in in.

Speaker Change: Customer behavior, and more to sort of the environment and access.

Speaker Change: We'll hear next from Mihir Bhatia with Bank of America.

Mihir Bhatia: Hi, Thanks for taking my question.

Mihir Bhatia: Hi, Mitch.

Mihir Bhatia: Just starting on credit, firstly, I just want to clarify the guidance for credit losses for the full year. Does that include foresight and the noise from this quarter? Like, or should we use 8.3 for this quarter as the base and, Just want to make sure we understand if there's any moving parts there. And one way to think about this is that you saw delinquency improve in the first quarter, and then that comes into our charge-offs two quarters later, so in the third quarter, you know, you'd expect to see the impact from that delinquency rate from the first quarter. I got it.

Mihir Bhatia: Just starting on credit.

Mihir Bhatia: Firstly I just want to clarify the guidance for <unk>.

Speaker Change: Credit losses for the full year does that include phosphate and like the noise from this quarter.

Mihir Bhatia: Or should we like U S. Three for this quarter as the base and.

Speaker Change: Just want to make sure understand that.

Speaker Change: If there's any moving parts there.

Speaker Change: So that thanks to hear that that eight three that $7 seven to eight three does include foresight.

Speaker Change: And you should use eight three.

Speaker Change: As you see from our guidance, we haven't made any changes it would be within the range and we remain pretty comfortable with that range and it includes foresight.

Speaker Change: And one way to think about this is you saw delinquency improve in the first quarter and then that comes into our charge offs. Two quarters. Later, so in the third quarter, you would expect to see the impact from that delinquency rate from the first quarter.

Jenny Osterhout: And then just sticking with credit, I wanted to just understand a little bit more just the dynamics of the front and back book, right? So, so I guess just a two-part question here. In terms of the back book, are we past the worst of the loss period? It looks like, by our calculations, the delinquency rates in the back book are still increasing, but I understand, you know, the book is getting smaller, and that might have an effect there. But so just trying to understand from a cumulative loss and vintage curve perspective, do you think you're past the worst of the losses in the back book? And then on the front book, is it trending?

Speaker Change: Got it and then just.

Speaker Change: Sticking with credit I wanted to just understand a little bit more just the dynamics in the front and back book right. So I guess just a two part question here in terms of the back book.

Speaker Change: Are we past the worst of the loss period.

Speaker Change: It looks by our calculations the delinquency rates in the back book, so increasing but I understand you know the book is getting smaller that might have an effect there, but so I'm just trying to understand like promote.

Speaker Change: Cumulative loss vintage scope perspective, do you think you're past the worst of the losses in the back book and then on the front book is it trending like I think 2019 was a yoga talked about in the past.

Jenny Osterhout: I think 2019 was the year we had talked about in the past as like a, quote unquote, normal year. Is that the right way to think about the front book credit performance? Yes, let me take your second question first on the front book.

Speaker Change: Or.

Speaker Change: Quote unquote normal year is that the right way to think about the front book credit performance.

Jenny Osterhout: You can think of our benchmark as pre-pandemic, so you can look at 2018 or 2019. And we like what we're booking there, and we see it performing in line, and you can think of it also as in line with our 6-7% loss guide for the front book, and we are seeing that perform. You know, the back book is about 24% of our receivables, so about a quarter of our receivables, but it makes up 43% of our 30-plus delinquencies, so clearly, it's still impacting our credit metrics. It continues to run off, and it shows the characteristics of a loss curve that are pretty typical for an aging portfolio. And remember, as a portfolio ages, it goes up the

Speaker Change: Yes, let me take your second question first on the front book.

Speaker Change: I do you can think of our benchmark as pre pandemic. So you can look at 2018 or 2019.

Speaker Change: And we like what we're booking there and we see it performing in line and.

Speaker Change: You can think of also as in line as our 6% to 7% loss guide for.

Speaker Change: The front book and we're seeing that perform.

Speaker Change: The back book is about 25, 24% of our receivables so about a quarter of our receivables, but makes up 43% of our 30 plus delinquencies. So clearly it's still impacting our credit metrics.

Speaker Change: It continues to run off and it shows the characteristics characteristics of a loss curves that are pretty typical for an aging portfolio and remember as our portfolio ages.

Speaker Change: It goes up the loss curve. So you know really right now what we're focused on is the front book and its performance. If you. If you looked at our 30 plus metrics on the front and back book you'd see typical increases on that back book.

John J. Rowan: So, you know, really right now, what we're focused on is the front book and its performance. If you looked at our 30-plus metrics on the front and back book, you'd see typical increases on that back book. We'll go next to John Rowan with Jamie. Hi, good morning.

Speaker Change: Well go next to John Rowan with Janney.

John J. Rowan: Hi, good morning.

Jenny Osterhout: Just a clarifying point on the last comment on the charge-off rate, so you said we're using the, you know, the 8-3 charge-off for the quarter when calculating the full year relative to guidance, but the 8-3, if I'm not mistaken, excludes credit card loans. But the consolidated charge of guidance for the year would include credit card loans. I just want to make sure that we're comparing apples to apples.

John J. Rowan: Just a clarifying point on the last comment on.

John J. Rowan: The charge off rate. So you said, we're using the <unk>.

John J. Rowan: The eight three charge off for the quarter when calculating the full year relative to guidance, but the eight three if I'm not mistaken excludes credit card loans.

Speaker Change: But the consolidated charge off guidance for the year would include credit card loans, just want to make sure that we're comparing apples to apples I get it includes foresight.

Jenny Osterhout: I understand it includes foresight, but the exclusion of credit card loans from consumer loans relative to the inclusion in C&I is a little confusing. Yes, so our guide includes cards and is for the total company, and this quarter, our total company loss rate was 8.5. And so we're using 85 for, 85 is what's going into, 85, not 83, is what's included in the total charge-off guide for the year, correct? And that would also be 87 for the first quarter as well, correct?

Speaker Change: But the exclusion of credit card loans from consumer loans relative to the inclusion in C&I I think is a little confusing.

Jenny Osterhout: That would be the consolidated charge-off. Exactly. Okay, I just wanted to make because I think the prior comment would have been a little confusing based on that. Okay, and then just quickly.

Speaker Change: Yes, So our guide for it includes cards and is for the total company and this quarter. Our total company loss rate was eight five and so were using a 585 as what's going into 8% not 83 is what's included in that total charge off guide for the.

Speaker Change: Correct, and then B also need 7% for the first quarter as well right.

Speaker Change: Today to charge offs.

Speaker Change: Exactly Okay I was wondering because I think the prior comment it would've been a little confusing.

Speaker Change: Based off of that Okay, and then just quickly.

John J. Rowan: So, the expense guide for the year does indicate a relatively sharp ramp up in the back half of the year, right? You were at, you know, for the first half of the year, 6.5 operating expense ratio. So, obviously, to average out to 6.7, you have to go up pretty materially, and based on my math, you'd certainly exceed $400 million a quarter in operating expenses. Is that correct?

Speaker Change: So the expense guide for the year does indicate a relatively sharp ramp up in the back half of the year right you were at.

Speaker Change: For the first half of the year six five and your operating expense ratio. So obviously the average out to six seven you have to go up pretty materially and its based on my math, it certainly exceed $400 million a quarter in operating expense expenses is that correct.

John J. Rowan: So.

Jenny Osterhout: [inaudible] As a reminder, last quarter, we talked about some of the expense actions that we took. And this quarter, you're seeing the full impact of those. And you're also seeing the impact of us acquiring Foresight, which has great operating leverage. We also see great operating leverage in our business. See, it is a real strength.

Speaker Change: As a reminder, last quarter, we talked about some of the expense actions that we took and this quarter you're seeing the full impact of those.

Speaker Change:

Speaker Change: And you're also seeing the impact of us acquiring foresight, who has great operating leverage and we also see great operating leverage in our base business and.

Jenny Osterhout: Just to give you some context, a year ago, we were at 7-1. So we're really moving in the right direction. I think you're just seeing sort of a very low point this quarter, and it's because of those two pieces that I just mentioned.

Speaker Change: We see it as a real strange just to give you some context a year ago, we were at seven one.

Speaker Change: So we're really moving in the right direction I think youre, just seeing sort of a a very low point this quarter.

Speaker Change: Yeah.

Speaker Change: And it's because of those two pieces that I, just mentioned and we still feel confident in that full year guidance of six seven and that's what we're doing here is trying to demonstrate a good balance between disciplined cost management and focus and investment for the future.

Jenny Osterhout: And we still feel confident in that full-year guidance of 6-7. And that's, you know, what we're doing here is trying to demonstrate a good balance between discipline, cost management, and focus, and investment for the future.

John J. Rowan: So the investment piece is what I would assume brings up the operating expenses for the back half of the year. Yes. Okay. All right. We'll go next to Vincent Cantic with BTIG.

Speaker Change: So the investment pieces, what I would assume brings up the operating expenses for the back half of the year.

Speaker Change: Yes, Okay, alright, thank you very much.

Speaker Change: Yeah.

Speaker Change: Well go next to Vincent can take with BTG.

Vincent Albert Caintic: Morning, thanks for taking my questions. I'm kind of going back to credit, and wanted to maybe dig in by product line, sort of what you're seeing with credit performance. So, I guess to the prior point about the 8.5% includes credit cards, the 8.3% doesn't. So maybe if you could talk about how the different product categories are performing. Yeah, I'm happy to take that, Vincent. On one card.

Speaker Change: Good morning, Thanks for taking my questions kind of wanted to so going back to credit wanted to maybe dig in by product line sort of what youre seeing with critical fragrance.

Speaker Change: So.

Speaker Change: I guess to the Powerpoint about eight 5% includes.

Speaker Change: Credit card at eight 3% doesn't so maybe if you could talk about like how.

Speaker Change: All of the different product categories are performing that'd be helpful. Thank you.

Speaker Change: Yep.

Speaker Change: I'm happy to take that Vincent.

Speaker Change:

Vincent: On cards.

Jenny Osterhout: You know, our, um... Our 30-plus was at 10.8 this quarter, and our net charge-offs were at 16.5. And remember, we have testing that's still flowing through these, and we've said we're booking loans that will have normalized losses in the low teens. We also have the ability in cards to price for the risk that we're taking, and we really like the overall returns that we're seeing. We're running this pretty cautiously for now, and our focus is on risk-adjusted returns.

Speaker Change: Our.

Speaker Change: Our 30 plus was at 10 10, eight this quarter and our net charge offs were at 16, five and remember we have testing that's still flowing through these <unk>.

Speaker Change: And we've said we're booking loans that will have normalized losses in the low teens. We also have the ability in cards to price for the risk that we're taking and we really like the overall returns that we're seeing.

Speaker Change: We're running this pretty cautiously for now and our focus is on risk adjusted returns and if you go back to what we said on Investor Day, we're looking for an over 20% risk adjusted return and we think that's a pretty good trade.

Jenny Osterhout: And if you go back to what we said on Investor Day, we're looking for an over 20% risk-adjusted return, and we think that's a pretty good trade, and really attractive as we scale. On auto, we report based on consumer loan delinquency trends, which is auto and personal loans together. And that's the 8.3 number I mentioned earlier, as compared to the overall 8.5.

Speaker Change: And really attractive as we scale on auto we report based on consumer loan delinquency trends, which is auto and personal lines together and that's the $8 three number I mentioned earlier as compared to the overall eight five.

Jenny Osterhout: And, you know, as Doug mentioned earlier, we've seen our book outperform the industry during this time period, but we're pretty cautious about growth of the book. And we're looking now at integrating Foresight, bringing that business together, and starting to think about growth and preparing for that. I, you know, let me just add generally, because there's been a bunch of questions about credit. You know, one is:

Speaker Change:

Speaker Change: And as Doug mentioned earlier, we've seen our book outperformed the industry. During this time period, but we're pretty cautious on growth of the book and we're looking now at integrating foresight, bringing that business together and starting to think about growth and preparing for that.

Speaker Change: Let me just add generally because theres been a bunch of questions on on credit.

Speaker Change: One is.

Douglas H. Shulman: Across the company, we like the trends that we're seeing. I think in our consumer loan business, you know, excluding CARD, and this holds for CARD, but I'm speaking specifically about consumer loans because I think that's where the bulk of our delinquencies and losses come from, because CARD is still a very small portfolio. The improvements that we saw in the first quarter have held into the second quarter. And if we look broadly at the consumer, you know, we do feel like we have an inflection point where income is now, especially, you know, this holds for the customers we're bringing onto our books now. However, income has caught up with cumulative inflation.

Speaker Change: Across the company, we like the trends that we're seeing I think in our consumer loan.

Speaker Change: Excluding card and this holds for car, but I'm speaking specifically for consumer loans.

Speaker Change: Because I think that's where the bulk of our delinquencies and losses come from because cars are still very small portfolio. The improvements that we saw in the first quarter have held into the second quarter.

Speaker Change: And if we look broadly at the consumer.

Speaker Change: We do feel like we have an inflection point, where income now, especially this holds for the customers, we're bringing onto our books now.

Speaker Change: Income has caught up with cumulative cumulative inflation and so consumers do have net disposable income that should bring them back to normalized.

Douglas H. Shulman: And so consumers do have net disposable income that should bring them back to a normalized, you know, kind of credit trend. I also mentioned, we still are just being super cautious across all of our products. As we run our models to make sure we get to our 20% return on equity for the equity we put in, we're taking what our model would say around loss content, and we're putting 30% stress on that.

Speaker Change: Credit trends.

Speaker Change: I also mentioned, we still are just being super cautious and across.

Speaker Change: All of our products.

Speaker Change: As we run our models to make sure we get to our 20% return on equity for the equity we put in.

Speaker Change: We're taking what our model would say around loss content, and we're putting 30% stress on that so the loans, we're booking today, whether theyre auto or extending credit in cards or personal loans, we've got cushion and that cushion means we have a tighter credit box. So we're booking Leslie.

Douglas H. Shulman: So the loans we're booking today, whether they're auto or extending credit and cards or personal loans, we've got cushion. And that cushion means we have a tighter credit box, so we're booking fewer loans. But we really like the trends across.

Vincent Albert Caintic: The trends are all moving in the right direction, but as all of you know, we're still in an environment where there's some caution. Okay, great. That's very helpful. And it segues well to my next question.

Speaker Change: Loans, but we.

Speaker Change: We really like the trends across the trends are all moving in the right direction, but you know as all of you know.

Speaker Change: We're still in an environment, where there is some caution.

Speaker Change: Okay, Great that's very helpful and a segue to my next question so.

Douglas H. Shulman: So I'm just wondering if you're seeing any differences in the consumers you're originating or you're seeing in your app. You spoke about the competitive environment getting better. So I'm wondering if maybe the credit quality of the consumer you're seeing is better. Typical Average.

Speaker Change: Just wanted to see if you're seeing any differences in their consumers you're originating senior applications going forward.

Speaker Change: Spoke about the competitive environment getting better so I'm wondering if maybe the credit quality of the consumer you're seeing is better than than your typical average and in terms of what the consumer is looking for we're seeing.

Douglas H. Shulman: And in terms of what the consumer is looking for, we're seeing, Unknown Attendee, Micah Conrad, John Rowan, Micah Conrad, Douglas Shulman, Micah Conrad, Yeah, look, we continue to have the majority of our customers, you know, we're booking in our, you know, Unknown Attendee, Micah Conrad, Douglas Shulman, Michael Kaye, Peter Poillon And again, this is aggregated across all the customers we're bringing on.

Speaker Change: No.

Speaker Change: Say credit card rate pricing, increasing license encouraging youre able to pass on price, but I'm wondering if you're seeing maybe more credit card debt consolidation or things like that where you might have a better quality customers who's willing to accept more price for what may months. Thank you.

Speaker Change: Yeah look we continue to have the majority of our customers.

Speaker Change: We're booking in our.

Speaker Change: You know.

Speaker Change: Higher credit quality customers than we were pre pandemic.

Speaker Change: I think I gave the last call. Some of this data and it's held true wages in general from 2019 are up.

Speaker Change: Around 25% for the customers, we're bringing onto our books, but as we put together a basket of inflation.

Speaker Change: Everyday expenses.

Speaker Change: Rent and housing medical care food energy.

Speaker Change: That cumulatively is up about.

Speaker Change: 20% to 25% and again this is aggregate across like all the customers.

Speaker Change: We're bringing on what that leads to is higher net disposable income for the customers. We're bringing on so they have more cushion once they have their income and all of their expenses to cover the loan that we're giving them and any other expenses that we have so.

Douglas H. Shulman: What that leads to is higher net disposable income for the customers we're bringing on. So they have more cushion once they have their income and all their expenses to cover the loan that we're giving them and any other expenses that we have. So the answer is, in aggregate, you know, customers have more cushion, more net disposable income, and more excess cashflow right now than they did pre-pandemic. Of course, every customer is different.

Speaker Change: The answer is in aggregate.

Speaker Change: Customers have more cushion more net disposable income more excess cash flow right now than they did pre pandemic.

Douglas H. Shulman: And you still have customers who, you know, have our, have to juggle a set of expenses, have unexpected expenses come up. But I think, in general, you know, we're feeling like this year, this first half of the year, we've hit an inflection point where incomes have caught up with expenses, which, you know, should help credit trends going forward. We'll go now to Mark DeVries with Deutsche Bank. I was a little surprised that you haven't tightened up on the guidance range yet for charge-offs given that kind of a half a year is in the books and, you know, current delinquencies are a decent read on kind of six months forward. So what's keeping the range relatively wide, and what kind of scenario gets you to the high end versus the low end?

Speaker Change: Of course every customer is different and you still have customers who.

Speaker Change: Half are.

Speaker Change: Have to juggle a set of expenses have unexpected expenses come up but I think in general we're feeling like.

Speaker Change: This year. This first half of the year, we've hit this inflection point, where incomes have caught up.

Speaker Change: With expenses, which.

Speaker Change: It should help credit trends going forward.

Speaker Change: <unk>.

Speaker Change: Yeah.

Speaker Change: We'll go now to Mark Devries with Deutsche Bank.

Mark Devries: I was a little surprised that you haven't tightened up on the guidance range up for charge offs, given kind of a half a year is in the books.

Mark Devries: <unk> current delinquencies are a decent read on kind of six six months forward. So what's keeping the range relatively wide and in what kind of scenario gets you to the high end versus the low end.

Mark Christian DeVries: Yeah, the only changes we made, Mark, were changes that were outside of the guidance. Anything within the guidance, we left as is. And, you know, we'll talk about it more as the year goes on. So we just, we haven't made any changes in guidance. Okay, fair enough.

Speaker Change: Yes, the only changes we made mark or.

Mark: Changes that are outside of the guidance anything within the guidance.

Speaker Change: We left as is and we will talk about it more as as the year goes on so we just we haven't given any change in guidance.

Jenny Osterhout: You know, just given some of the positive commentary on, you know, still feeling good that the first half of the year is a peak in charge-offs and some of the improving trends you're seeing. Any thoughts you can share on kind of where you see the reserve ratio trending over the course of the year? Thanks for the question.

Speaker Change: Okay fair enough.

Speaker Change: Just given some of the positive commentary on <unk>.

Speaker Change: Still feeling good that the first absolutely or as a peak in charge offs and some of the improving trends youre seeing any thoughts you can share on kind of where you see the reserve ratio trending over the course of the year.

Speaker Change: Thanks for the question.

Jenny Osterhout: We've said before that we're going to hold our reserve rates steady. And so, you know, you can see that we have foresight, and with the impact of the policy alignment we mentioned earlier, our reserve rate, our coverage ratio went from 11.6 to 11.5, which is really quite a modest, quite modest change in coverage. But I would expect that to continue unless you see a major shift in the macro environment. So, I wouldn't expect to see some sudden change in our reserve levels.

Speaker Change: We we've said before that we're going to hold our reserve rate steady and.

Speaker Change: And so you.

Speaker Change: You can see that we brought on four side and with the impact of the policy alignment, we mentioned earlier our reserve rate.

Speaker Change: Coverage ratio went from 811 six to 11 five.

Speaker Change: You know, which is really quite modest and quite modest change in coverage, but I would expect that to continue.

Speaker Change: Unless you see a major shift in the macro environment. So I wouldn't expect to see some sudden change in our reserve levels. You know I think we will need to feel very good about the future in order to make changes to reserves.

Jenny Osterhout: You know, I think we'll need to feel very good about the future in order to make changes to reserves. Okay, and then just one last question for me. I just wanted to clarify that the raised receivables guidance does not assume any kind of loosening of the credit box. And if that, if that's true, what are you looking for?

Douglas H. Shulman: Is it the same type of, you know, significant improvement in the macro to get a little bit looser on the credit box? Yeah, we have not loosened our credit box. You know, I think what we would need to see to open a lot of it is we just need to see the recent vintages continue to perform well. And again, we're taking a conservative posture. I've said this before.

Speaker Change: Okay.

Speaker Change: Then just one last question for me I, just wanted to clarify that.

Speaker Change: The rays receivables guidance does not assume any kind of loosening of the credit box and.

Speaker Change: And if that's if that's true what are you looking for is it the same type of you know significant improvement in the macro.

Louis: To get a little bit Louis around the credit box.

Speaker Change: Yes, we have not loosened our credit box.

Speaker Change: I think what we would need to open a lot of it is we just need to see.

Speaker Change: The recent vintages.

Speaker Change: Continue to perform well and again, we're taking a conservative posture I've said this before.

Speaker Change: We don't manage the company to growth you know we.

Douglas H. Shulman: You know, we don't manage the company to growth, and we may be leaving money on the table. But given that there's still some uncertainty in the macro, we're being careful. I think, you know, there's just a period of stability and credit headed in the right direction. We also do weather vane testing, so we're always testing just below our credit box.

Speaker Change: We may be leaving money on the table.

Speaker Change: But given that there's still some uncertainty in the macro.

Speaker Change: We're being careful.

Speaker Change: I think there is the just a.

Speaker Change: Period of stability and credit headed in the right direction as one of it one of those we also do weather vane testing. So we're always testing just below our credit box.

Douglas H. Shulman: And we're testing in different states and geographies, different risk grades, different product types, secured, unsecured, different kinds of customers, new customers, former customers, customers we have on our book, which want to extend into a larger loan. And so as we see those tests coming well over our 20% return on equity profile, those will be the pockets that we'll start to open up in. In aggregate, it's managed in very specific pockets around the kind of variables that I talked about.

Speaker Change: And we're testing around different states and geographies different risk grades different product types secured unsecured different kinds of customers new customers former customers customers, we have on our book, which want to extend into a larger.

Speaker Change: Loan and so as we see those task coming well over our 20% return on equity.

Speaker Change: Profiled those will be the pockets that will start to.

Speaker Change: To open up and so.

Speaker Change: Again, we the credit box is not going to be.

Speaker Change: Managed as.

Speaker Change: In aggregate, it's managed in very specific pockets around the kind of variables that I talked about and so look I think the time will come.

David Michael Scharf: And so, look, I think, you know, the time will come, you know, and we could see, you know, our view is, you know, this is a cyclical business. And you can see a world where the consumer is feeling a lot better, interest rates are coming down, credit is getting much better, and a bunch of things could be moving in the right direction. We feel pretty good that even in a tricky environment, our metrics are now both moving in the right direction, where we've seen a modest uptick in origination, and we see the credit trends moving in the right direction. Now, we'll go to David Scharf with Citizens JMP.

Speaker Change: And we could see.

Speaker Change: Our view is this is.

Speaker Change: Consumer lending is a cyclical business and you can see a world where the consumer is feeling a lot better interest rates are coming down credits getting much better in a.

Speaker Change: A bunch of things could be moving in the right direction, we feel pretty good that even in a tricky environment. Our metrics are now both moving in the right direction, where we've seen a modest uptick in origination and we see the credit trends moving in the right direction.

Speaker Change: We'll go now do they have the charts with citizens JMP.

Douglas H. Shulman: Actually, my questions have been answered. They've been largely around what you just addressed, Doug The Credit Box, but, Maybe I try to phrase it a little differently. You know, because it was interesting commentary about. [inaudible] Net Disposable Income of Cont. As we think about the indicators that would allow more broadly to widen the credit, is there anything...

Speaker Change: Yeah actually might my questions have been answered they've been largely around what you just addressed.

Douglas H. Shulman: Doug the credit box, but.

Speaker Change: Maybe I'll try to phrase it a little differently.

Speaker Change: You know because it was interesting commentary.

Speaker Change #103: About consumer wage growth cumulatively, you haven't caught up with with inflation and it almost sounded in your prepared remarks like you said.

Speaker Change: It's just that the consumer maybe still feel stress and hasnt recognize that.

Speaker Change: If if household liquidity in net net disposable income has caught back to 2019 levels as we think about the indicators that would allow you to more broadly widened the credit box.

Speaker Change:

Speaker Change: Is there anything in kind of the broader macro environment you're waiting on.

Unknown Attendee: Unknown Attendee, Micah Conrad, Douglas Shulman, Michael Kaye, Peter Poillon, Micah Conrad. You know, I'm going to repeat myself a little bit because I, you know, just went through it. I mean, we want to see our book continue to perform well over a period of time. We are going, the weather vane, the pockets we look at are, you know, when we decide to open, it won't be a big bang. It will be very specific.

Speaker Change: Or is some of the weather veining as you described it in place.

Speaker Change: And you may feel comfortable getting indicators and some of this testing sooner rather than later.

Speaker Change:

Speaker Change: You know, what I'm going to repeat myself, a little bit because I just went through it I mean, we want to see our book continue to perform well over a period of time.

Speaker Change: We're going the the weather vane the pockets we look at is when we decide to open it won't be a big Bang it it will be very specific.

Douglas H. Shulman: We still have the 30% stress overlay that isn't an overlay we're seeing, but to put it in perspective, the 30% stress overlay that we put on our book in August of 2022 when we did our major tightening is the uptick that you would see if unemployment went to five to 6%. So the big macro factor we're watching is how the Fed and how the environment working around interest rates and what that does to employment rates.

Speaker Change: We still have the 30% stress overlay that isn't an overlay, we're seeing but to put it in perspective.

Speaker Change: The 30% stress overlay that we put on our book in August of 2022, when we did our major tightening.

Speaker Change: Is the uptick that you would see if unemployment went to 5% to 6%. So the big macro factor we're watching is.

Speaker Change: You know how are we how it how is the fed and how is the environment are working around kind of interest rates and what does that do to employment rates and so we look at all of those but the main factor of our book is not macro is why do we see what's the proprietary data we have.

Douglas H. Shulman: And so we look at all of those, but the main factor of our book is not macro, it's what we see, what our proprietary data we have, what are the applications that are coming in, and where are we seeing our credit trends? Again, not in aggregate, but by channel, by customer, by geography, by product. And that's where we'll see.

Speaker Change: What are the applications that are coming in and where are we seeing our credit trends again not in aggregate, but by channel by customer by geography by product and that's where we'll.

Speaker Change: See some opening.

David Michael Scharf: [inaudible] that's helpful and maybe just a follow-up on that. As we think broadly about, Unknown Attendee How you're underwriting, and then the credit box unfolds, should we be thinking about personal loans any differently from audit? Loss rates are going to be also improved by recovery rates, which will improve. Collateral Value Used Car Price, Are there differences we should be mindful of, or if there are?

Speaker Change #101: That's helpful and maybe just a follow up on that.

Speaker Change #104: As we think broadly about.

Speaker Change #107: Uh Huh, how your underwriting and then the credit box unfolds.

Speaker Change: Should we be thinking about personal loans any differently from auto and specifically there are so many things that are nuanced in the auto market.

Speaker Change: Sleep loss rates are going to be also improved by recovery rates, which were approved by <unk>.

Speaker Change: Collateral value used car prices are there differences, we should be mindful of or if there is a.

Speaker Change: More broad loosening eventually.

Speaker Change: Should it be felt equally among your asset classes.

Jenny Osterhout: Thanks, I'll take it. It's Jenny. So they are different asset classes, and they move differently. And I think what you heard Doug describe is that we're mostly looking at our books. And so you look at those individual books, and you're looking at pockets within those books.

Speaker Change: Thanks, I'll take it it's Jenny.

Speaker Change #102: So they are different asset classes, and then they move differently and I think what you heard Doug described is we're mostly looking at our books and so you were looking at those individual books and Youre looking at pockets within those books. So you know it comes to these.

Jenny Osterhout: So, you know, when it comes to these, we're talking about growth as if it's a singular thing that happens, but really, it's these smaller decisions that we're making about certain segments and subsegments based on certain products, whether it's secured or unsecured, and what channel they come in, and their risk score, you know, there's a variety of pieces to it. So I do think, and you're doing the same, you know, on auto, you're doing the same with a different credit box, and you're right, it is different.

Speaker Change #108: You're we're talking about growth as if it's a singular thing that happens, but really it seize smaller decisions that we're making about certain segments and sub segments based on certain products, whether it's secured or unsecured and what channel they come in and their risk score. It you know there's a variety of pieces to it. So I do I do think in you.

Speaker Change #102: We're doing the same on <unk>.

Speaker Change #100: Auto you're doing the same with a different credit box and you're right. It is different it has to you know do you have a different you know set of recovery strategies, and there's collateral et cetera. So I I do I would think of them as slightly different I think they move at slightly different times and really we're looking at the individual book.

Jenny Osterhout: It has to, you know, you have a different set of recovery strategies, and there's collateral, etc. So I would think of them as slightly different. I think they move at slightly different times, and really, we're looking at the individual books and what we see within those individual books.

Speaker Change #100: And what we see within those individual box.

Douglas H. Shulman: Yeah, hey, um... We are out of time. On that specific question, we're happy to follow up. And even within our auto book, you know, franchise dealers, you know, a lot of it is you're managing around the collateral, and there's different delinquency patterns, and there's different collection patterns.

Speaker Change #106: Yeah, Hey.

Speaker Change #106: We're out of time on that specific question, we're happy to follow up and even within our auto book.

Speaker Change: Franchise dealers you know a lot of it is you're managing around the collateral and there's different delinquency patterns and theres different collection patterns and we're happy to get into that you know and as a follow up on and on further further calls, but let me just end by saying.

Douglas H. Shulman: And we're happy to get into that, you know, as a follow-up and on further calls. But, you know, let me just end by saying, We do feel good about the quarter. We do feel good about the trajectory of credit. We're encouraged by the slight uptick in originations, which you didn't see the full effect of in the quarter, and that is continuing today.

Speaker Change #105: We do feel good about the quarter, we do feel good about the trajectory of credit.

Speaker Change #105: We're encouraged by the slight uptick in originations, which you didn't see the full effect.

Speaker Change #105: In the quarter and that is continuing.

Speaker Change: Today, and you know on card and auto.

Douglas H. Shulman: And on CARD and AUTO, we now are really setting the base so that when we do feel we have more clarity around the macroeconomic environment, we've got really nice, We're around, we're happy to do follow-ups with all of you, and thanks for joining the call and hope everyone has a great day. Thank you. This does conclude today's OneMain Financial second quarter 2024 earnings conference call.

Speaker Change: We now are really setting the base so that when we do feel we have clear more clarity around the macroeconomic environment, We've got really nice base.

Speaker Change: Based platforms that we can grow from so.

Speaker Change: We're we're round, we're happy to do follow ups with all of you and thanks for joining the call and hope everyone has a great day.

Speaker Change #109: Thank you. This does conclude today's Onemain financial second quarter 2024 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.

Operator: Please disconnect your line at this time and have a wonderful day.... The Ultimate Parody Site!

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