--Sallie Mae aims to expand fee-income business to $1 billion a year

--Expansion would require some merger and acquisition activity, says Sallie Mae CEO

--CEO reaffirms the student lender's 2011, 2012 earnings targets

(Adds the closing stock price in the fourth paragraph and ratings firm commentary in the final paragraph.)

 
   By John Kell 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--SLM Corp. (SLM) Chief Executive Albert Lord said the student lender is aiming to expand the company's yearly fee-income business to $1 billion in the next several years, a goal that would require some acquisitions to achieve.

Lord said SLM, commonly known as Sallie Mae, would need to engage in some merger and acquisition activity to bolster fee income from the current $700 million per-year rate. Lord made the comments at the Goldman Sachs U.S. Financial Services Conference in New York City.

He added the company's full-year earnings projection of $1.80 a share looked "pretty good" with less than a month remaining in the final quarter of the year. Lord said Sallie Mae is expected to earn about $2 per-share in 2012, affirming the company's October target.

The company's shares closed up 3.5% to $13.16, making it one of the top performers in the S&P 500. The stock has risen 4.5% this year, roughly in line with the broader market's performance.

Sallie Mae realigned its business to focus on private student loans last year after it and other private lenders lost the ability to originate federally guaranteed loans on the government's behalf through what was known as the Federal Family Education Loan Program. Sallie Mae has said it expects private student loans would exceed $3 billion next year, which would exceed projected originations for 2011.

Still, Lord acknowledged there were some concerns about an education-loan bubble, and even referenced the Dutch tulip market crash in 1637. He said economic bubbles--such as the dot-com bubble in the late 1990s and the real-estate bubble in the 2000s--tend to burst when the underlying collateral or investment declines in value.

"The fact is the education is worth it," Lord said, noting unemployment for undergraduates was far less than their non-college graduate peers. Furthermore, Lord said once individuals pass the age of 25, loan collection becomes highly reliable.

Lord said Sallie Mae's loan performance is currently better than the company's internal projection, saying "not all loans are subject to the bubbles we've heard and read about."

The company is also aiming to win a third investment-grade rating from Moody's Investors Service, which rates Sallie Mae at Ba1, the highest junk-level rating. Other raters, Standard & Poor's Ratings Services and Fitch Ratings, meanwhile, have Sallie Mae at the lowest investment-grade level. Lord said the junk rating was a major frustration as Sallie Mae's year-end unsecured debt will stand at $17 billion, down from $45 billion three years ago.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

(END) Dow Jones Newswires

December 06, 2011 16:49 ET (21:49 GMT)